Deaths of Members

Baroness D'Souza: My Lords, I regret to inform the House of the death of the noble Lord, Lord Randall of St Budeaux, on August 11, and of the noble Lord, Lord Morris of Manchester, on August 12. On behalf of the House I extend our sincere condolences to the noble Lords' families and friends.

Energy: Biofuels
	 — 
	Question

Lord Kennedy of Southwark: To ask Her Majesty's Government what assessment they have made of the impact of the ending of the duty exemption for biofuels and the implementation of the renewable transport fuel obligation on companies in the United Kingdom that manufacture biofuels from recycled food waste.

Earl Attlee: My Lords, the Government strongly believe that the renewable transport fuel obligation-the RTFO-delivers effective and sustainable market-based support to the biofuels industry. The RTFO provides additional support to biofuels made from waste by awarding two renewable transport fuel certificates-RTFCs-for each litre of fuel supplied. The Department for Transport has committed to a review of the double-certificate scheme and support provided under the RTFO in 2013.

Lord Kennedy of Southwark: I would like to draw the noble Earl's attention to the SME producers who recycle local food waste into biodiesel which has a remarkably low-carbon footprint. These companies have had to cope, in effect, with a 20p per litre reduction in their income because of the current value of certificates. It is clearly a difficult issue for these smaller companies, some of which have actually gone out of business. Will the noble Earl agree to facilitate a meeting between me, representatives of SME producers and the relevant Minister?

Earl Attlee: My Lords, I am well aware of the difficulties being experienced by these SMEs with their commendable work in producing biofuels. I would of course be delighted to invite the noble Lord, and any other noble Lord who would like to come along, to a meeting with the Minister and officials-the experts who understand these quite complex issues.

Lord Bradshaw: Let us bear in mind that the people who recycle the food waste to which the noble Lord opposite referred are almost all very small businesses. They are not large corporations. They go round and collect fish-and-chip oil and similar things from shops, and of course they are doing a service in that this stuff is not going to landfill. Will the Minister refocus, please, on the plight of small businesses that are being very adversely affected? The RTFO certificates to which he referred are not compensating for the reduction from the previous scheme.

Earl Attlee: My Lords, although I agree with my noble friend's analysis, he needs to understand that these fuels are also traded internationally in large quantities.

Lord Palmer: My Lords, does the noble Earl agree that, in reality, the RTFO is in a complete shambles, most especially because it is answerable to four different government departments? I ought perhaps to declare an interest: along with the late Lord Carter and others, I was responsible for persuading the previous Labour Government to implement the RTFO.

Earl Attlee: My Lords, several government departments may be involved but my honourable friend Mr Norman Baker is in charge of the policy. It is complicated, but I believe that it is a good and efficient policy that provides biofuels in a most efficient way.

Lord Teverson: My Lords, making transport fuels sustainable has to be a key aim of a low-carbon economy as they account, I think, for a quarter of all carbon emissions. What research are the Government doing to make sure that we develop sustainable biofuels for the future? It is such an important area for a sustainable economy for the future.

Earl Attlee: My Lords, I do not know what research has been commissioned but I would like to inform the House of one of the difficulties with biofuels, which is some of the complex effects of indirect land use change. For instance, if you start using tallow as a biofuel then the use of certain types of tallow could increase the demand for palm oil, which could have effects on land use change far away from the United Kingdom. It is a complicated area. There is research into understanding this, but I am not sure what research the Government are directly commissioning.

Lord Davies of Oldham: My Lords, will the Government consider doing what several other European Governments are doing and separate bioethanol and biodiesel in the RTF obligation, thereby offering the possibility of avoiding exactly the problem he identified regarding what might suit large traders and significant commerce as well as the small businesses providing this very important service at a more local level?

Earl Attlee: My Lords, the danger, which we are drifting into, is providing state support for small businesses. We must provide the regime with the incentive from the renewable transport fuel obligation, but we must be careful not to provide state aid to certain types of businesses.

Crime: Drink-driving
	 — 
	Question

Lord Sheldon: To ask Her Majesty's Government what action they are taking to reduce drink-driving.

Earl Attlee: My Lords, to tackle drink-driving, we need to give the police effective tools and to streamline the enforcement process. Our plans include revoking the right to opt for a blood test following the breath test, as this results in delay and some offenders avoiding prosecution; re-launching the drink-drive rehabilitation scheme; streamlining the enforcement processes for the drink-drive testing regime, starting in 2014; and developing publicity about the consequences of drink-driving.

Lord Sheldon: My Lords, I thank the Minister for that very useful Answer that moderate drinking and then driving is generally reasonable. Spending on drink-driving must become acceptable; it is reasonable to expect expenditure on drink-driving.

Earl Attlee: My Lords, it is important to understand that my department is solely concerned with road vehicle safety; it is not concerned with the health aspects of drinking. However, of course, I answer on behalf of Her Majesty's Government.

Lord Taverne: My Lords, 45 years ago, as a Home Office Minister, I co-operated with the excellent Ministry for Transport of the then Secretary of State for Transport, Barbara Castle, on drink-driving legislation. She very bravely ignored all the forecasts about a violent backlash from motorists and the law is now widely accepted. As Australia, New Zealand and most of the American states have now accepted random testing, which is by far the most effective way of reducing deaths and serious injuries, will the Minister advise the present Secretary of State for Transport to show the same kind of courage that was shown by Barbara Castle 45 years ago?

Earl Attlee: My Lords, the difficulty with random testing is that it would not achieve the desired result. The object of random testing is to create an expectation among drivers but that would fail to produce results if not backed by raising the actual level of testing. This would not be cost-effective or a justified use of police resources in the current economic climate, because if most of these tests were random, they would prove to be negative.

Baroness Finlay of Llandaff: Can the Government explain why they have not considered lowering the limit from 18 milligrams per 100 millilitres of blood down to 50 or lower to bring us into line with the rest of Europe and most of the rest of the world? Why have they not considered a zero tolerance to alcohol, given that a survey by Brake showed that more than one in four people were driving the day after having consumed large amounts of alcohol and were almost certainly above the limit, although not formally tested?

Earl Attlee: My Lords, we have carefully considered this issue, and we have considered and reported back on the North report. The difficulty is that if we lower the limit to 50 milligrams, we would divert resources away from the cohort of drivers who ignore the law and drive quite often at double the legal limit. The police would be tied up with dealing with these low-level offenders and would not be dealing with the much higher-risk offenders.

Lord Berkeley: Is not the real argument that the Minister is putting forward that any reduction in the level to that of the rest of Europe goes against the total anti-Europe policy that we see across so many fronts, rather than trying to save a lot of lives on the roads by lowering the limit?

Earl Attlee: No, my Lords. We act on good advice from our officials. It is important to understand-

Noble Lords: Oh!

Earl Attlee: My Lords, I think I shall be having a chat with the noble Lord, Lord Kennedy of Southwark, about that matter tomorrow. It is important to understand that other European countries have a lower limit but also much milder penalties. We have a policy of a slightly higher limit, which is based on the Grand Rapids study, but with severe penalties for the slightest infringement. Our results are better than the European results. I can assure the noble Lord that it is not an anti-European policy.

Lord Avebury: My Lords, what advice have the Government received about the number of lives that could be saved by lowering the limit to 50 milligrams?

Earl Attlee: My Lords, the only thing that my department is concerned about is saving lives by having an effective policy. That means correctly allocating resources and addressing the most serious problem, which is persistent unregulated drinkers who consistently flout the law and drive with very high blood-alcohol levels.

Lord Davies of Oldham: My Lords, the noble Lord has referred to the report of Sir Peter North. He stated that he thought that, if the limit were lowered from 80 milligrams to 50 milligrams, 168 deaths a year would be saved by such action. Surely, that is a compelling argument for the Government to consider.

Earl Attlee: My Lords, it would not be if it diverted police resources from the much more serious problem of those who pay no regard whatever to the law.

Lord Condon: My Lords, does the Minister agree that there is merit in monitoring the impact of new legislation in France and elsewhere in Europe, which now requires motorists to carry breathalysers in their vehicles, to raise awareness of the problems and to encourage self testing by the more responsible motorists who may not know whether they are above or below the limit?

Earl Attlee: My Lords, I am very much aware of the French policy. However, the difficulty is that, if a motorist has a means of testing his blood-alcohol level, he will then drink up to the limit.

Noble Lords: Oh!

Earl Attlee: He will, my Lords. The difficulty is that the motorist would drink more than he would otherwise and, therefore, would take greater risks. We do not want people to drink at all.

Baroness Gardner of Parkes: Having just returned from Australia, I have brought back two points about this message. I believe that random testing has a very good effect: the young change their attitude and if they are going to a party, one of them drinks nothing. My other point is that new drivers, who have the highest proportion of accidents, have a nil level for at least one year after they qualify. Will the Government consider either of those possibilities?

Earl Attlee: My Lords, on my noble friend's last point, during the passage of the Road Safety Bill under the previous Administration, that proposal was suggested. The previous Government turned it down and I believe that they were probably right to do so.

Lord Brooke of Alverthorpe: My Lords, although I recognise that the major problem that we face is dealing with repeat offenders, does the noble Earl agree that the second group with which we have the greatest problem, and who suffer the most deaths and have the most accidents, are people aged under 21? Following on from the previous question from that side of the Chamber, would the Government be prepared, among the several initiatives they are looking at, to contemplate a programme of zero tolerance for the under-21s, so that we might perhaps achieve a cultural change and so get the benefit in future generations?

Earl Attlee: The noble Lord is quite right that young drivers feature disproportionately in the statistics. A difficulty arises in initially telling youngsters that they cannot drink at all and then, at a certain point, we tell them that they can. The problem is not so much youngsters with a little bit of alcohol in them, but when they have drunk far too much.

Baroness McIntosh of Hudnall: My Lords, I am puzzled about an answer that the noble Earl gave to an earlier question concerning the impact of a 50 milligram limit in Europe. He appeared to imply that if the limit were that low or lower, penalties would have to be commensurately lower as well. I cannot entirely understand the logic of that. Why could we not have a lower limit and the same rigorous penalties?

Earl Attlee: The noble Baroness is absolutely right. She will be aware that Scotland now has the ability to set a different limit but it cannot change the penalties. If Scotland goes for a lower limit, the current penalties will apply.

Businesses: Start-ups
	 — 
	Question

Lord Bates: To ask Her Majesty's Government what assessment they have made of the number of new business enterprises being created in the United Kingdom; and what measures they are taking to encourage more new business start-ups.

Lord Marland: My Lords, in 2011-12, Companies House reported 450,000 newly registered companies in Great Britain, the highest number since records began. We are helping SMEs in many different ways, including providing an extensive package of advice and financial support. This includes the new start-up loan scheme and supporting high-growth potential SMEs, with over 1,000 businesses signed up to our GrowthAccelerator scheme.

Lord Bates: I thank my noble friend for that encouraging Answer, and I welcome him to his new role, to which he brings great experience. In doing so, I pay tribute to his predecessor, my noble friend Lady Wilcox, who also made a significant contribution in that role.
	Is my noble friend aware that, while it is encouraging to see the number of SMEs increasing, only one in five SMEs actually exports overseas, and of that one in five only one in 10 exports to the fastest-growing parts of the global economy, in Asia, Africa and the Middle East? What steps will my noble friend take to encourage more businesses to take opportunities in those key markets for us?

Lord Marland: I am very grateful for my noble friend's encouraging remarks and I am delighted to be managing this brief; my noble friend Lady Wilcox is a hard act to follow.
	My noble friend puts his finger right on the pulse; my statistics say that one in six SMEs are exporting, not one in five. We have a huge amount to do to change the attitude and incentivise people to export. That is why my noble friend Lord Green has visited 42 countries in the past 18 months. I, in my own small way, have visited 25 countries-

Noble Lords: Oh!

Lord Marland: No, listen, please. I have visited 25 countries in the past 12 months, the Prime Minister continually takes delegations of small and medium-sized businesses with him, ambassadors are being encouraged to be outward facing, and UK Trade and Investment has had £35 million of new investment, appointing representatives throughout the world. We have done this with cross-party support. I am very grateful, for example, to the noble Baroness, Lady Symons, for the work that she does; to the noble Baroness, Lady Nicholson; to the noble Lord, Lord Risby, and to other noble Lords, across the parties, for helping to promote UK plc at this very difficult time.

Lord Bilimoria: My Lords, last month I attended a conference on entrepreneurship in Sheffield called MADE, attended by 2,500 entrepreneurs and budding entrepreneurs, which is now known as the Davos-the Glastonbury-of entrepreneurship. Of course, a major topic there was the challenges of raising finance for SMEs-the Secretary of State for Business himself spoke about this. Will the Minister tell us what the levels of financing are now compared to before, with all the government schemes that are coming in? I hear from SMEs that they are still finding it difficult to raise finance. We talk about moral hazard in bailing out the banks. Surely there is a moral hazard here, when the banks are not lending to the SMEs that can generate the growth and employment that this country desperately needs.

Lord Marland: There is no doubt that the banks are not lending to the extent to which the Government would want, and this is something that we are looking at very closely. However, we cannot castigate banks and make sure that they increase their capital and at the same time ask them to increase their lending, so I understand the problem that the banks have. I could list loads of initiatives: we are spending £1 billion in the new business bank, and we have the new enterprise allowances, which are worth £80 million. We have Smart loan schemes up to £75 million, and we are mentoring people through Mentorsme. We have the growth accelerator to which I referred earlier and the enterprise finance guarantee, through which £800 million has been awarded so far. I am actually quite grateful for this question, as noble Lords can tell, and I hope that my answer satisfies the noble Lord.

Baroness Oppenheim-Barnes: My Lords, my noble friend has given the House some very good news indeed, but would he not agree that it is just as important to keep new businesses open as to open them, and to do so in many cases without the more onerous regulations under the Equality Act?

Lord Marland: There is no doubt that the two great threats to business are regulation and, of course, taxation. We are committed to reducing the level of regulation through our Red Tape Challenge. Of course, the most marvellous thing that the Lord Chancellor has done is to show a very clear pathway for the reduction in corporation tax-it is headlined down to 22% in two years' time-which will make it the lowest in the G20. That is a really significant boost to business. For SMEs it is 20%, which is a very encouraging target.

Lord Harrison: Would the Minister accept that because of the byzantine entry forms for the regional growth fund most funding went to big businesses not small ones, to the south-east and not to the other regions, and nothing much was helped to grow except the occasional passing wilting weed?

Lord Marland: It is unlike the noble Lord to be unfair, but I think he is in this case. In the north-east alone, 329 new businesses have been supported by government initiatives, and 95 have been involved in the passport to export, which is the educational programme on how to export. So it is not just the south-east and the south-west that are involved. Clearly checks and balances have to be carried out in applying for any scheme, but that is not new to this Government-it has been the case for all Governments.

Lord Naseby: Will my noble friend look at the recommendation from the Mary Portas review, which is so vital to small businesses up and down the country? In particular, will he look at the recommendations, which I think are there, about car parking for consumers and the importance of that? Reports are now coming in of local authorities hiking up car parking charges. Indeed, some of them are closing car parks.

Lord Marland: Obviously I shall discuss that with my friends in local government. It is not something for me to deal with, but it is something that the Government will look at as part of the Portas review. I take on board what my noble friend has said.

Lord Mitchell: My Lords, last week the Government announced a new partnership to help SMEs. It is hard to credit it, but their partner of choice is Barclays Bank, the number one casino bank. The Minister listed a whole load of programmes which the Government have announced, and indeed they have, but the fact is that very little of it is getting through to the SMEs themselves. When are this Government going to make sure that these programmes are much more effective?

Lord Marland: First, I welcome the noble Lord to the Front Bench. It is a pleasure to see him. I was looking up his great achievements earlier and, in addition to business and technology, I noticed that one of the things that interested him was alcohol abuse. Following what I did last night, I am thinking of putting that down as one of my interests. He raised a greater point-what the Government are doing. We are trying to make the weather and to create activity. That activity is working, which is why I was able to say that 450,000 new businesses have started in the past 12 months, the most since records were kept.

Sport
	 — 
	Question

Lord Giddens: To ask Her Majesty's Government how they will build on the success of British sport in summer 2012.

Baroness Stowell of Beeston: My Lords, I am sure the whole House will wish to join me in taking this opportunity to congratulate all our athletes who participated and won medals in the Olympic and Paralympic Games this summer, the wonderful volunteers who made the Games so special and everyone who contributed to the organisation of the Olympic and Paralympic Games.
	The Government are committed to making sure that both the Olympic and Paralympic Games have a lasting legacy. Elite sport will receive £500 million over the next four years leading up to Rio. Grass-roots sport will benefit from £1 billion of investment to provide facilities and opportunities to take up sport. The UK will host a number of major sporting events and we will build upon the already successful School Games providing competitive sport in schools.
	The legacy of the Games goes beyond sport and all parts of the Government will work together so that the UK as a whole takes advantage and reaps the benefit of what we achieved as a nation this summer.

Lord Giddens: My Lords, I thank the noble Baroness for that response and echo her sentiments. Does she think that the sense of solidarity and national purpose which was so visible during the Olympics can be sustained or, possibly, extended? If so, how might that be achieved?

Baroness Stowell of Beeston: I agree with what the noble Lord has outlined as being part of the success of the Games this summer. I was very proud that my noble friend Lord Coe was at the Labour Party conference last week to pay tribute to Dame Tessa Jowell for everything she did as a Minister to ensure that we succeeded in getting the Games. He made the point very clearly that to build on the success of the Games-and as I said in my previous Answer this is not just about sport, although sport is hugely important and we need to build on it-we must continue that bipartisan and cross-party approach to make sure that we take all the available benefits.

Baroness Grey-Thompson: My Lords, given the huge number who have been inspired by the extraordinary Olympic and Paralympic Games this summer, could the Minister explain how good access for disabled children to PE in schools and mainstream clubs can be ensured? This is not just about continuing to develop an elite pathway-in which I declare an interest-but about changing the whole culture towards healthier lifestyles.

Baroness Stowell of Beeston: I would like to pay particular tribute to the noble Baroness for all the vital work she did in commentating on the Paralympics-I know she also did so on the Olympics-and helping to ensure that the rest of us properly understood what was being achieved.
	It is not just disabled people who are inspired by what was achieved at the Paralympics: the rest of us were, too. We need to build on the success of the Olympics by ensuring that all stages of the sporting strategy, which has been covered in great detail in a ministerial Statement which is available in the Printed Paper Office today, integrate disabled sport at all levels. I was particularly pleased to learn that when Sport England confirms its next round of investment in national governing bodies in December, it will require, for the first time, delivery of specific targets for participation of disabled people.

Lord Moynihan: My Lords, this is the first false start of the summer. In declaring my interest as the outgoing chairman of the British Olympic Association-

Baroness Billingham: My Lords-

Baroness Anelay of St Johns: My Lords, the noble Lord, Lord Moynihan, was ready to speak on the past two occasions and gave way. We will have the opportunity to hear from the opposition Front Bench very shortly after his question.

Lord Moynihan: My Lords, I apologise for the earlier false start. In declaring my interest as the outgoing chairman of the British Olympic Association, may I thank noble Lords from all sides of this House for their consistent support for both the Olympic and Paralympic Games since we first debated them some seven years ago?
	The challenge is now to turn inspiration into participation. Does the Minister agree that central to this objective is a priority focus on school sport and the establishment of new links between clubs, volunteers, governing bodies, primary, secondary and, indeed, independent schools?

Baroness Stowell of Beeston: My noble friend, to whom I owe a great deal of gratitude for everything he has done, is absolutely right, and I should make one small point. The Secretary of State for Education met representatives of some of the national governing bodies last week and is building on what is already known about in terms of strategy.

Baroness Billingham: I welcome for the first time today the face of the noble Baroness, Lady Stowell, at the Dispatch Box and I look forward to hearing from her frequently. I also pay tribute to her predecessor who worked so well at the Dispatch Box; we enjoyed listening to her. However, since they came to power, the coalition Government have cut the school sport budget by 69%. Now Michael Gove's curriculum proposals threaten to tear the rest of the heart out of school sport by ignoring the fact that sport and physical education should be part of the core curriculum. We all know that to be good at sports you have to start young. That start, as we have just heard, has to be made in primary schools. How will the Government therefore follow up all the good will that is now engendered by the Olympics by ensuring that the very people we need to make that start in primary schools are given a fair and reasonable chance?

Baroness Stowell of Beeston: Sport in schools is a vital part of our ongoing strategy for and commitment to sport, and I should just say to the noble Baroness that PE is a compulsory part of the national curriculum at all key stages of education. That is the only topic, in addition to maths, English and science, that we have made compulsory at this time.

House of Lords: Reform
	 — 
	Private Notice Question

Lord Wakeham: To ask Her Majesty's Government, in the light of the Deputy Prime Minister's Statement on 3 September, what their plans are for reform of the House of Lords.

Lord Wakeham: My Lords, I beg leave to ask a Question of which I have given private notice.

Lord Strathclyde: My Lords, the Government have decided not to proceed with the House of Lords Reform Bill, and it has been withdrawn.

Lord Wakeham: I thank my noble friend the Leader of the House for his reply. Might I assume from his Answer that the Government have no plans for further reform of your Lordships' House in this present Parliament?

Lord Strathclyde: My Lords, the hard work of many Members of this House and the other place to shape this Bill has of course inched us forward in this great debate, but Lords reform is now a matter for future Parliaments. I can confirm that the coalition will not be able to deliver Lords reform during this Parliament, which in a way seems extraordinary, given that more than 70% of the House of Commons voted in favour of the Bill at Second Reading.

Baroness Royall of Blaisdon: My Lords, I am grateful to noble Lord, Lord Wakeham, for tabling this PNQ but regret the fact that the Leader of the House did not make a full and proper Statement. For the Government to tell this House formally by means of a reply to a Private Notice Question that they have abandoned their legislation on further House of Lords reform is woefully inadequate. If the Lords had been sitting on 3 September, at the same time as the Commons, the Leader would have repeated the Statement.
	I welcome the fact that the coalition has finally come to its senses and abandoned what was a bad Bill. I must say that for the Leader, in his piece in today's House Magazine, to lambast Labour for the Bill's failure is a bit rich. My party wants reform, but the right reform. Would the Leader agree that it is regrettable that the Deputy Prime Minister appears, in a fit of pique, to have ruled out any reforms to your Lordships' House before the next election, including the Steel Bill?
	Now that the Bill has gone the Government have time on their hands, so what are we going to do? Will the Leader therefore agree to an urgent meeting of the usual channels to examine the Government's legislative programme strategically, and come up with proposals on planning and handling that will find favour with the whole House and ensure that we could respect the firm convention that this House will normally rise on legislating days by about 10 pm?

Lord Strathclyde: My Lords, I think that is a question for which the word "opportunistic" was originally coined. Lords reform was, of course, based almost entirely on Jack Straw's White Paper from 2008, when the noble Baroness stood at this Dispatch Box. No doubt historians will wish to examine exactly why the Bill fell in another place. My own view is that while the House of Commons was keen on the idea of an elected House, when Members found out what it might mean for them they became less keen. Furthermore, it required a consensus right across the parties in another place and in this House. The Labour Party was not willing to form part of that consensus in a programme Motion, demanding a referendum, the removal of the Cross Benches and the entrenchment of powers. I therefore make no apology for saying that the Labour Party was at least in part to blame for there being no further action on Lords reform.
	As to the further legislative programme, Bills will be introduced. However, while there is time currently available in the House for Commons for more legislation, of course we were not expecting the House of Lords Reform Bill until the new year. We expected to be in Committee at least, and perhaps for the Session to continue well into the summer. We will now be able to finish the Session in a normal time. However, I very much welcome any discussions that the noble Baroness would like to have.

Lord Cormack: My Lords, would my noble friend accept that there are many people in this House who are delighted that the Government came to their senses on this issue? Would he assure the House that he has not ruled out the housekeeping measures which are in the Steel Bill? Will he consult with the noble Lord, Lord Steel, the noble Baroness, Lady Hayman, and others on what sensible, modest housekeeping measures can be brought forward to make this House even more effective than it is at the moment? Will he also use his very considerable influence within his own party to ensure that, at the next general election, the Conservative Party does not fight on a manifesto that has any reference at all to an elected second Chamber?

Lord Strathclyde: My Lords, that may or may not be asking too much. Of course I am aware that this House will be very pleased with the news. Ever since the election, in every debate that we have had there has been an overwhelming majority against the proposals in the Bill. As far as the Steel Bill is concerned, this House has passed a Private Member's Bill in the name of my noble friend Lord Steel. It now languishes in the House of Commons at the back of the Private Member's Bill queue. It remains to be seen whether a Member of the House of Commons regards it as a priority and decides to pick it up. However, I will just point out that more than over 70% of the House of Commons voted in favour of an elected House. It may be a little difficult to believe that the House of Commons will now move to entrenching an appointed House so soon.

Baroness Hayman: My Lords-

Lord Campbell-Savours: My Lords-

Lord Giddens: My Lords-

Noble Lords: Hayman!

Baroness Hayman: My Lords, I am grateful to the House, and I am sure that the whole House will be grateful to the noble Lord, Lord Wakeham, for ensuring that we at least have 10 minutes to discuss this issue. Will the noble Lord the Leader of the House accept that reform and election are not synonymous? Will he also accept that two areas of consensus did emerge from the debate on the Government's Bill? First, the Bill for elections to this House was not deliverable. Secondly, there was an urgent need to make changes in the House. I must say to the noble Lord, Lord Cormack, that I have never seen myself as a modest housekeeper and am more interested in some substantive reforms that are urgent for this House. Despite the pique felt over the withdrawal of the Bill, those remain urgent priorities on which there is widespread agreement. Will the noble Lord accept that and help make some progress on it?

Lord Strathclyde: My Lords, there may well be widespread agreement in this House, but I have seen no indication that there is widespread agreement in another place. That agreement is absolutely necessary before a Bill can be passed. I urge the noble Baroness, with all her influence, and those who agree with her to discuss things further with Members of the House of Commons.

Lord Rennard: My Lords, does my noble friend the Leader of the House agree that whatever may or may not happen in the near future in relation to reform of your Lordships' House, there is now absolutely no case whatever for continuing the farcical practice of holding by-elections to replace hereditary Peers when one of their number passes away?

Lord Strathclyde: My Lords, the by-elections were never supposed to occur because the Labour Party in 2001 promised that it would come forward with proper, elected reform that did not in the event take place. The existence of the by-elections may still be a spur for further reform.

Lord Campbell-Savours: With two-thirds of the House of Commons voting in favour of an elected House, why will the Government not table a Motion for a referendum to be held at the time of the next general election, in the knowledge that when that comes to a vote in the House of Commons the Labour Benches would be required to support it because it is in our election manifesto; and Liberal Democrat MPs, along with Conservative supporters of an elected House, would also feel obliged to? The country would then decide and would lock in Parliament to a yes or no decision.

Lord Strathclyde: The Deputy Prime Minister looked at many options, including having discussions with the leader of the Labour Party. However, it was decided that moving forward would not be fruitful.

Lord Elton: My Lords, will my noble friend exercise his good offices with the Prime Minister and the commission and ask them to exercise great restraint in the appointment of new Peers until some method is devised to make room for them?

Lord Strathclyde: My Lords, there is a Question on tomorrow's Order Paper that will deal with that.

Lord Elystan-Morgan: Does the Minister accept that it will be the verdict of history that the proposed reform failed because it was fundamentally and fatally flawed? It created a situation whereby mutual strangulation would have been the order of the day between the two Houses. Will he give an undertaking to the House that any future consideration, which of course must encompass the primacy of the House of Commons, should be on the basis of a written constitution?

Lord Strathclyde: My Lords, it will certainly be for historians to take a view on what happened, not only during the past two and a half years but over the past 15 years over which the debate has raged. However, as I said, more than two-thirds of the House of Commons voted in favour of an elected second Chamber. I do not think that the Bill was fatally flawed, but I do think that there will be no further progress until the House of Commons understands the full implications of an elected House being more independent, stronger and able to hold it and the Government to account.

Defamation Bill
	 — 
	First Reading

The Bill was brought from the Commons, read a first time and ordered to be printed.

Local Government Finance Bill
	 — 
	Order of Consideration Motion

Moved By Baroness Hanham
	That the amendments for the Report stage be marshalled and considered in the following order:
	Clause 1, Schedule 1, Clause 2, Schedule 2, Clauses 3 to 5, Schedule 3, Clauses 6 to 9, Schedule 4, Clauses 10 to 20.
	Motion agreed.

Financial Services Bill

Financial Services Bill 
	4th Report from the Delegated Powers Committee

Committee (6th Day)

Relevant document: 4th Report from the Delegated Powers Committee.
	 Moved by Lord Sassoon
	That the House do now resolve itself into Committee.

Lord Eatwell: My Lords, I rise to raise an important issue concerning the conduct of the Committee stage of the Bill. On 3 October-last Wednesday-I wrote to the noble Lord, Lord Sassoon, in these terms:
	"The Wheatley study on the future of LIBOR has produced a series of conclusions with which the Labour Party is broadly in agreement. I congratulate both Martin Wheatley and his team for their achievement, and the Government for initiating this investigation.
	I note from the statements of Treasury ministers, and from the Treasury website, that it is the Government's intention to implement the Wheatley proposals by means of amendments to the Financial Services Bill. No such amendments have been tabled as of yesterday".
	That was 2 October, and indeed no amendments have been tabled as of today.
	"I presume that such amendments will involve predominantly clauses that have not yet been debated (as suggested by reference to particular FSMA clauses in the Wheatley Report itself)".
	The Wheatley report refers to the first clause that we will debate today.
	"However, it is possible that you will also need to introduce amendments to clauses already debated, in which case it would be entirely inappropriate to introduce such amendments at Report. Given the importance of these issues it is imperative that the House have the opportunity to debate these matters in the freedom of Committee, rather than under the constrained rules of the Report Stage.
	May I therefore have your assurance that should the Government, as a consequence of the Libor scandal and of the recommendations in the Wheatley Report, plan to introduce amendments to clauses 1 to 5, or at some later stage, amendments to clauses at that time already debated, that you will re-commit the appropriate clauses, hence ensuring that the House of Lords has the scope for full debate".
	It has since become clear that the Government intend to introduce on Report all the entirely new material presaged in the Wheatley report. The noble Lord, Lord Sassoon, wrote to me on 2 October-the day before I wrote to him which was somewhat mysterious. He said:
	"I do not believe that it is necessary to recommit the Bill, and see no reason why a substantive debate on the relevant clauses at Report stage would offer insufficient opportunity for scrutiny by the House.
	Re-commitment would risk unnecessarily delaying the implementation of both these important reforms to LIBOR setting processes, and of the equally urgent reform of the UK's financial regulation regime which we have been debating through the Committee sessions to date".
	The noble Lord's reply does not take into account what I actually asked for. First, I was not asking for total recommitment. I was asking only for the clauses which deal with entirely new material from the Wheatley report to be recommitted. Secondly, I believe very strongly that with respect to financial regulation it is not an issue of quibbling about delay but of getting it right. These enormously complex matters deserve the iterative consideration which is possible only in Committee. I remind noble Lords that on Report they can speak only once. Thirdly, it is quite wrong to deny this House the opportunity to consider entirely new and complex material within a Committee setting. I would therefore ask the noble Lord, Lord Sassoon, to reconsider his rejection of my proposal that the relevant clauses be recommitted.
	If he is unwilling to do that, perhaps I may make a constructive proposal. Either he or the Chief Whip, who unfortunately is not in her place, should give an assurance that the rules of Report will be relaxed for consideration of what might be called the "Wheatley" clauses when they are introduced.

Lord Barnett: I warmly agree with my noble friend on the Front Bench, and it gives me an opportunity to refer to the noble Lord, Lord Sassoon, himself. In the Recess I read with regret that he proposes to retire at the end of this year. He and I have had a few exchanges across the Floor and I will miss them, but I look forward to continuing with those exchanges until the end of the year.
	Not only do I agree with my noble friend in the points he has made about the Bill, what is even more important is that the whole Bill should be dropped for the moment. There is no hurry for it and much of it will cause great damage to financial services in this country. As the noble Lord, in his new position, is no longer going to be quite so subservient to the Chancellor of the Exchequer, I certainly hope that he can tell us the truth, drop the Bill for the time being and, as my noble friend has suggested, come back to the House with a new one.

Lord Sassoon: My Lords, I thought we were going to talk about some clauses on LIBOR, but we have now strayed, in the imaginative way that the noble Lord, Lord Barnett, does, into scrapping the Bill. I can assure the House that the Government intend to carry on with this Bill according to the timetable because it is vital that we get the financial regulatory architecture right. It is an architecture that failed us miserably in the financial crisis, so we will of course press on with the Bill.
	As noble Lords know, LIBOR is the most significant interest rate benchmark used by the market-not just the UK market, but globally. It underpins contracts worth at least $300 trillion, so it is imperative that market confidence in the rate is restored quickly in order to ensure that, in the future, contributors to this benchmark act with greater integrity, promoting financial stability, legal certainty and business continuity. It is important to be clear about that. It is also important to be clear that the Government have not yet announced our response to the Wheatley review, so what the noble Lord, Lord Eatwell, raises is a somewhat hypothetical question at the moment. He notes correctly that my right honourable friend the Chancellor of the Exchequer has indicated that the Financial Services Bill is the Government's preferred legislative vehicle to implement new policy arising from the review. Should the Government decide to accept Martin Wheatley's recommendations in full, we anticipate that the clauses which would implement the review will indeed be debated at the Report stage of this Bill, and the draft clauses will be published in good time in advance of that date.
	As noble Lords with longer experience of the House than me will well know, recommitment is an extremely unusual procedure. Notwithstanding what the noble Lord, Lord Eatwell, says, it would risk causing delay not only to these important reforms of the LIBOR setting processes but to the Bill itself. It is quite routinely the case that government amendments setting out new policy are tabled at the Report stage, and in this case, as the noble Lord has confirmed, there is broad cross-party consensus in favour of the policy. There has already been wide debate of the issues during the period when Mr Wheatley was carrying out his work. In the light of that, I believe that substantive debate on the relevant clauses at the Report stage will offer sufficient opportunity for scrutiny by the House, but I am sure that, in the normal way, the usual channels will consider the business of the House, as they always do. That is the appropriate way to carry this sort of thing forward.
	This is a significant piece of legislation, which has already benefited from a very constructive approach to scrutiny from your Lordships' House. We will do all we can to reinforce that debate including on any clauses we bring forward on LIBOR through, among other channels, briefing parliamentarians separately outside the formal debate. However, I suggest that for this afternoon it might be more productive to carry on with the sixth day of our scrutiny of the Bill.

Lord Peston: My Lords, we make the obvious point that getting it right is not the same as doing it quickly. We ought always to bear that in mind in your Lordships' House. There is a straightforward solution to this. One is my noble friend's suggestion for Report. Since I assume, particularly given the Leader of the House's remarks, that we are not imminently in danger of being abolished, that we are still a self-governing House, we can therefore decide, if we wish to, one of two things: either my noble friend's proposal, with which I strongly agree, that we would simply have Committee stage rules at Report stage for what is being proposed; the alternative is not to end the Committee stage until the Government can get their tiny mind around the Wheatley proposals and come up with their amendments.
	I have read the Wheatley report. The proposals do not strike me as being intellectually very demanding-nowhere near as difficult as deciding on a railway line. Therefore, the noble Lord ought to respond positively instead of adopting this negative approach and remind himself that we will get only one chance to get this right. We ought to make sure that we do not bungle it.

Lord Eatwell: My Lords, I should make clear that I said that the Labour Party was broadly supporting the conclusions of the Wheatley report; not the Government's policy because we do not know what that is yet. We look forward to seeing it. Perhaps we will support it; perhaps we will not. On the substantive matter, I welcome what I saw was the noble Lord's support for a degree of flexibility at Report, referred to also by my noble friend Lord Peston. If it could be agreed in due course by the usual channels that for the Wheatley clauses a Committee-style procedure be permitted and the House agreed to that, then I think we could proceed with due speed.
	Motion agreed.
	Clause 6 : Extension of scope of regulation
	Amendment 147JA
	 Moved by Lord Sharkey
	147JA: Clause 6, page 38, line 32, at end insert-
	"(2A) After paragraph 9A insert-
	"Part 1BThe activity of establishing, operating or winding up a crowdfunding scheme
	"Crowdfunding Scheme" has the meaning given in section 417.""

Lord Sharkey: My Lords, this is a probing amendment. Its purpose is to allow discussion of the issues surrounding crowd funding in the United Kingdom. The informal meaning of crowd funding is probably entirely obvious. However, as far as I can tell there is no generally accepted legal or technical definition of the term. Wikipedia describes crowd funding as,
	"the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations".
	More particularly crowd funding also refers to,
	"the funding of a company by selling small amounts of equity to many investors".
	This was the meaning directly addressed in President Obama's JOBS Act of April this year which, among other things, gave the SEC 270 days to bring in appropriate regulatory regimes for crowd funding in order to encourage its take up and its expansion.
	In the UK, as elsewhere, there are essentially three possible forms of crowd funding. The first is the donation model in which funders provide money to an organisation for no commercial or financial return. The second is the lending model, in which funders provide money by way of repayable interest-bearing loans. These two models are actively used in the UK and do not seem to face significant regulatory barriers, provided that loans do not involve the provision of consumer credit. However, neither of these is suited to the more speculative form of SME or start-up enterprises: donations because enthusiasm, although often surprisingly generous, will be restricted to a fan base, and lending because many organisations will be conventionally assessed as not credit-worthy.
	The third method of crowd funding, investment, is potentially a significant source of funds for start-ups and similar high-risk ventures but it faces regulatory problems in the United Kingdom. There are two kinds of investment crowd funding: the equity model, where investors receive shares in the company; and the collective investment scheme model, where investors receive a right to a share in profits or revenue but no shares. As a general rule, it is not possible for a company in the UK to raise money by crowd funding using either the equity or the CIS models. With some limited exceptions, both these models fall within the UK regulatory regime's prohibition of such activities. That is the problem about which I would like very much to hear the Minister's views.
	Specifically, does the Minister accept that crowd funding may be a very useful way of getting substantial funds into the UK's SMEs, an area where our banks are currently underperforming? If so, does he acknowledge a degree of urgency in setting up an appropriate regulatory framework, and can he accept that the existence of high levels of risk in investing in small companies need not necessarily mean that ordinary people should not be allowed, or even encouraged, to invest their money in such enterprises? Perhaps, in this context, it is worth remembering the conclusion for the US jobs market of the Kauffman report: that for 20 of the past 27 years, all net new jobs came from start-ups.
	My noble friend the Minister will know of the report published in February this year by the Association of UK Interactive Entertainment, entitled A Proposal to Facilitate Crowd Funding in the UK. This report rehearses the benefits to business of making crowd funding more easily accessible to ordinary people. It makes, in some detail, recommendations for regulatory change in order to achieve it. In summary, the report recommends that crowd funding be permitted generally and not restricted to some qualified class of investor; that any regulation be light touch; that there should be no absolute requirement that shares be issued to investors, so that the CIS model may be applied; that there should be no upper limit on what can be raised for projects, with certain conditions applying; and there should be an investment limit per person to limit individual exposure.
	Perhaps I could ask the Minister to give his views on these proposals, to consider in a general sense how we may use crowd funding to both increase and speed up the flow of funds into the SME sector, and to give some indication of the Government's intentions in this area and of timings. I beg to move.

Lord Peston: My Lords, the noble Lord has introduced his amendment as a probing amendment, which I take to mean that it is meant to be educative. My natural tendency is to agree with him, but I have great difficulty in that I do not have the faintest idea what he is talking about. In particular, I do not know what crowd funding is. The amendment says it should have,
	"the meaning given in section 417",
	but there is no Section 417 in any of the documents that I have. It would help me enormously if he could extend my education and tell me what this is all about.

Lord Stewartby: My Lords, I, too, would like some assistance from my noble friend. It is not easy to understand, in large parts of this Bill, what it is trying to get at. I raise this under discussion of Clause 6 because that is what permits the transfer of regulation of consumer and small business credit from the Office of Fair Trading to the new Financial Conduct Authority.
	I have had an approach about this from the Finance & Leasing Association. They told me that they do not seek an amendment to the Bill, rather a commitment by the Government to a sensible timetable, to ensure the Government get the rules right and avoid the loss of important consumer protections. This is because the Government have set a very ambitious target date of April 2014 for the creation of a new regime for credit regulation. They propose a twin-track approach which will include a slimmed-down version of the Consumer Credit Act with enhanced powers. The Government say they want to transfer as much as possible of the CCA and associated OFT guidance into this new rule book by April 2014. However the detail of the new rule book will not consulted on until the second half of 2013, and the final rules will only be available in March 2014. This makes the implementation of an April 2014 date virtually impossible. I would be grateful for enlightenment and assistance from my noble friend.

Lord Barnett: My Lords, I always like to be enlightened. I agree with my noble friend and I have a tendency to agree with the noble Lord, Lord Sharkey. However on this occasion I do not. I must apologise to the Committee. This matter is no doubt explained somewhere in the huge volume of papers we received at the outset, including the two volumes of the Bill. I must have missed it. I thought I was relatively assiduous in looking at this Bill. No doubt the noble Lord, Lord Sassoon, will tell us where it is. I am sure the officials with whom the Government generally agree-although not on every subject in the world, I understand, and sometimes they even prosecute or suspend them-must have explained what the noble Lord has failed to tell us. I hope either the noble Lord himself or the noble Lord, Lord Sassoon, will explain it more fully. I for one do not understand it.

Lord Eatwell: My Lords, although I agree with the noble Lord, Lord Sharkey, that it is enormously important that we improve the flow of funding to small firms, particularly given the complete failure of the Government's attempts to improve the funding through banks to small firms, I believe that we should approach this proposal with great care. The problem with crowd funding is that crowds can often be subject to hysteria. We have seen hysterical funding levels in what might be deemed to be fashionable or popular companies: lastminute.com comes to mind, as does the recent launch of Facebook. In both cases, excessive hysteria associated with the popularity of the particular company led to investors losing quite a lot of money.
	However in the SME sector, the fundamental problem for small investors is the risk to which they are exposed. They will necessarily have significantly less information than they would from a listed company. Given that lack of information, and the high mortality rate of small and medium-sized companies-thankfully they have a high birth-rate as well-it is likely to lead to a lot of not-very-well-off people losing significant sums of money.

Lord Sassoon: My Lords, I will put some things to one side before I deal with the main substance of my noble friend's argument in this short and interesting debate around crowd funding. First, for the help of the noble Lord, Lord Barnett, there is indeed no Section 417 because crowd funding has been introduced into this Bill by my noble friend Lord Sharkey. I am sure that in due course he will table a Section 417 which will make us all a lot clearer about the definition. However, for the interim benefit of the noble Lord, Lord Peston, and rather than me banging on about what crowd funding is and boring the rest of the House, I draw his attention to the FSA guidance on this topic put out in August this year. It gives a helpful short introduction to what it is all about.

Lord Peston: Perhaps I may interrupt the Minister. As I listened to my noble friend, it suddenly dawned on me what we were talking about. It really does mean crowd funding and, following what my noble friend said, there is a very simple answer to it: do not do it.

Lord Sassoon: That is one way of dealing with it, but it is not the way in which the Government wish to deal with it, which I shall explain in a moment. I say to my noble friend Lord Stewartby that I have a hunch that before we pass this clause we will have a discussion about timetabling. If he will forgive me, I shall come back to the matter then, but if we do not I will make sure that I raise the timetable in question later.
	Crowd funding is an innovative new source of funding for start-ups and other small enterprises. I share my noble friend's hope that it will continue to grow in the coming years, so my answer to his first question is a resounding yes. However, on his second question, which is the subject of the amendment, while I understand my noble friend's enthusiasm for establishing discrete legislative provision to bring this very new sector into regulation, I do not agree that it is needed at this stage and so cannot accept the amendment.
	My noble friend raised the US JOBS Act. In the US, there was a very distinct problem and a pressing need, which led to the introduction of that Act. The situation is different in the UK. Among other things, there has been no clarion call from industry for more regulation. However, we should not be complacent, and the FSA is not waiting until there is a problem before doing things.
	Platforms seeking to operate what are in effect collective investment schemes must obtain authorisation from the FSA. The FSA already has powers to take action against firms operating without appropriate authorisation. It is up to the FSA to work with platforms seeking to offer equity returns to their investors to ensure that they obtain relevant permissions before the activity that is most likely to apply here-arranging deals in investments-starts. This is happening already, with one such platform securing authorisation from the FSA prior to its launch.
	Of course, the regulator must balance the need to allow innovative models to flourish with ensuring that consumers understand the risks involved with new platforms. In this regard, the FSA's recent guidance on crowd funding makes clear its concerns, which are evidently shared by the noble Lord, Lord Peston. This is the right sort of regulatory response. It shows that we should not rush to create new regulated activities here.
	I am also concerned that amending the Bill in this way could create confusion that stifled the growth of the new sector. There are currently many forms of crowd funding. We do not yet know precisely what definition my noble friend had in mind, but the vast majority of these platforms ask customers to make donations rather than investments. They have been very successful in doing that. The world's largest crowd-fundng site, Kickstarter, for example, which will launch in the UK very soon, raised more than $100 million for creative projects in the past year. A platform such as that does not pose the same risks to investors, who expect no money in return for their donation, so we have to be mindful of the risk of legislating in a way that does not fully take account of the breadth of the businesses in this new area.
	In conclusion, although industry standards and further FSA and FCA guidance may have an important role to play in future, my view is that the regulatory structure proposed in the Bill is suitably flexible to support the growth of the full variety of crowd-funding platforms, with a careful eye on the needs of the consumer throughout. With that, I hope that my noble friend will agree to withdraw his probing amendment.

Lord Sharkey: I thank the noble Lord for his answer. The noble Lord, Lord Peston, invited me to extend his education, but I think I should decline any such attempt. The noble Lord, Lord Barnett, did not believe that there was a definition there, and he was right-there is no definition. I shall not do it again now, but I did try to explain what forms crowd funding currently takes. Perhaps I did not give a clear impression of how important or what size it currently is, and that is my fault, but crowd funding exists and plays quite a large part in the landscape of small companies, both in the United States and already here in the United Kingdom.
	I think I noticed an expression of perhaps amazement on the face of the noble Lord, Lord Peston, at the notion that people should donate $100 million to commercial enterprises for no return at all-an aspect of crowd funding that clearly he was not familiar with.

Lord Peston: I take it that if the thing goes ahead, it will be made clear to people putting money into this sort of thing that they are essentially going to a betting shop, where they may win or lose. That is what it is about. Since our country appears to be gambling mad at the moment, there seems no reason to prevent this new form of gambling from being introduced. However, as someone who knows-coming, as I have said before, from a large family of gamblers-that gambling is a total mug's game, I hope there is someone around who tells people that crowd funding is a mug's game.

Lord Sharkey: It is nice to know that the noble Lord, Lord Peston, approves of gambling. Returning to the Minister's response to the amendment, I note the objections that he raises, some of which were raised by the noble Lord, Lord Peston, as well. I accept that this is a new area that is full of dangers for unwary investors, and I also accept the dangers of regulating an infant industry too early. However, we are about to see a significant expansion in this area, which we should all keep an eye on for the future. Having said that, I beg leave to withdraw the amendment.
	Amendment 147JA withdrawn.
	Amendment 147K not moved.
	Amendment 147L
	 Moved by Lord Stevenson of Balmacara
	147L: Clause 6, page 39, line 9, at end insert-
	"(4A) After paragraph 23B insert-
	"Contracts for debt management services
	23C (1) Rights under a contract for debt adjustment or debt management services.
	(2) Debt-adjusting is, in relation to debts due under regulated credit agreements or contracts for the hire of goods, negotiating with the creditor or owner, on behalf of the debtor or hirer, terms for the discharge of a debt, or taking over, in return for payments by the debtor or hirer, his obligation to discharge a debt, or any similar activity concerned with the liquidation of a debt.
	(3) Debt management is the giving of advice to debtors or hirers about the liquidation of debts including those due under regulated credit agreements or contracts for the hire of goods.""

Lord Stevenson of Balmacara: My Lords, I declare an interest as chair of the Consumer Credit Counselling Service, a leading debt advice and debt provision charity. Currently, Clause 6 extends the scope of FiSMA by including credit information services. They are already regulated under the Consumer Credit Act 1974, but an amendment is needed to bring them into FiSMA. Clause 6 also changes the current definition of credit contracts to include both unsecured and secured loans, and other forms of credit, and includes hire agreements as a regulated activity.
	Our Amendment 147L seeks to include debt adjustment and debt management services in the Bill. This issue has already been raised several times during the passage of the Bill, and we will return to it on subsequent Committee days. The Government have given reassurances that the existing text allows debt management to be included and that they intend it to be included. Perhaps the Minister will confirm this again when he comes to respond. However, this is a permissive approach and we feel that it might not be sufficient in this case. There is a case for debt management to be mentioned in the Bill, and I will run over one or two points in support of that.
	The UK's free, independent debt advice and charity sector helps to ensure that clients pay less and are able to repay their debts more quickly compared to those clients who choose a fee-charging route. Recent figures on this are illustrative. A fee-charging company will typically involve total payments of about £35,900 on a £30,000 debt, including up-front fees and a monthly administration charge. It will therefore take nearly 10 years to wipe out the debt. On the other hand, a debt charity will repay the full amount of £30,000 in full, with no additional charges made to the client, in just over eight years.
	Now, the OFT has recently looked at the practices of debt management companies in this area in relation to the guidance that it already issues. It regards misleading advertising by fee chargers as the most significant area of non-compliance with its guidance. In its 2010 review of the sector, it highlighted the fact that many firms claim their services to be free when they are patently not free. We believe that regulation is urgently needed here so that there is transparency about charges. At the same time, we also think that there should be an obligation for fee-charging services to inform potential clients of the availability of free advice services. This, again, is mentioned in the OFT's debt management guidance; it is not thought to be widely adhered to.
	The practice of charging up-front fees itself supports a business model that has pernicious consequences for people trying to repay their debts. Fees undermine the capacity for borrowers to make repayments and, as I have tried to show, that extends the timescales. Advice provided by fee-charging companies is inevitably-and, I suppose, naturally-skewed towards debt management plans and individual voluntary arrangements that generate a revenue stream for those companies. As a result, people struggling with debt often end up with the wrong solution.
	The Government have proposed a DMP protocol setting out what all parties can expect from a debt management plan, and the hope is that this will ensure that debtors are treated more consistently, both by creditors and by fee-charging DMP providers. However, progress on this seems to have stalled. In any case, it is no real substitute for the strong regulation that this sector now needs.
	Amendment 147M would add claim management regulation to the scope of the FCA. No one-in this House, particularly-will have failed to notice the growth in CMCs recently, particularly those touting for business in relation to financial services, such as claims for mis-sold PPI in particular. I have never taken out a PPI, but ironically I had a text just before I came into the Chamber this afternoon explaining that I was missing out on £2,737, which was waiting for me simply by return through a text service. Indeed, I have had several phone calls in the past week or two.
	It might just be a temporary phenomenon, and existing arrangements might well be the same, but I have my doubts. The problems that are often reported to us are aggressive or illegal marketing practices such as cold calling and unsolicited text marketing; persuading people to divulge their payment card details and then using this to take unauthorised payments for service; and failing to inform people that a claim might actually be settled on a non-cash basis, where there is an offset against a remainder debt, leaving that person with no money to pay the fees that are going to be charged.
	Claims management companies are not currently unregulated; they are already covered by the claims management regulator, which is part of the Ministry of Justice. There is a statutory scheme set out in the Compensation Act 2006, and regulations and rules are made under this. Quite apart from the need to question why this area is being retained within government when we are actually setting up a new regulatory structure, there is also a question about why the Ministry of Justice has not been able to get on top of the problems that I mentioned earlier. The claims management regulator within the MoJ is actually currently consulting on current practices, but there is a long way to go.
	While it may be possible for these issues to be dealt with, possibly through an order such as the regulated activities order, quite serious points continue to operate to the detriment of the consumers who are involved in this area. Bringing the CMCs, as with the debt management companies, under the supervision of the FCA is surely the right way forward. I beg to move.

Baroness Sherlock: I will ask a couple of questions on Amendment 147M, and in doing so I remind the House of my registered interest as a senior independent director of the Financial Ombudsman Service. I am grateful to my noble friend for raising the question of claims management companies and their regulation, something that we have come to in this House once or twice in recent months.
	The problem is significant. I ask two questions, one of my noble friend and one of the Minister. Can my noble friend reflect on what would happen if and when claims management companies might move on from their current obsession with the financial services sector? As he has, I have certainly received many texts. At the moment, claims management companies are focusing on financial services, primarily because of the widespread mis-selling of payment protection insurance that has created significant consumer detriment. Therefore, there is a significant problem at the moment, and that is what they are focusing on.
	However, in the past the companies have focused, for example, on people who have-or fancy that they might have-sustained personal injuries such as whiplash in car accidents. In future, they might move on to other areas. I wonder, therefore, whether we could reflect on what the best way might be to regulate this industry when in fact the target could move. It is the activity itself that needs regulation, rather than necessarily the sector.
	This highlights the particular problem that we have: that the activity of claims management companies-particularly the bad activity of the minority that are doing the kind of things described by my noble friend-needs addressing. In this I wonder whether the Minister could help us out. Could he tell the House very quickly what steps the Government are taking to improve the regulation of CMCs? For as long as this activity remains within the Ministry of Justice, can he assure the House that adequate resources and powers will be made available to those doing this job to redress the kind of unpleasant practices and considerable detriment that has been created on top of the original detriment that has been done?

Lord McFall of Alcluith: I support my colleague's comments on this clause. Only last week I received a text saying that there was £2,200 waiting for me to claim as a result of that; I think, therefore, that something needs to be done. In relation to PPI, only six weeks ago both the banks and the consumer organisations had a meeting to sort out the problem with claims management simply because they said that the Ministry of Justice is not fit to look at it at this time. There are big problems here for the Minister; there needs to be consultation. If he gave us an indication today that the department was engaging in that, it would give some reassurance to those who are plagued by claims management companies at the moment.

Lord Sassoon: My Lords, my comments on Amendments 147L and 147M will be brief, because we discussed both issues in some depth in earlier sessions of the Committee. Amendment 147L seeks to enable the activities of debt adjusting and debt management to be regulated under the Financial Services and Markets Act. I can reassure the Committee on this point. The effect of Amendment 147L is already achieved by Clause 6, which enables all activities currently regulated by the Office of Fair Trading under the Consumer Credit Act to be transferred to the FCA under FiSMA. I hope that is a very clear answer and the direct reassurance for which the noble Lord, Lord Stevenson of Balmacara, was asking.
	I will not be quite as brief on Amendment 147M; this continues to be an important area even though we have discussed it before. The amendment seeks to add the services provided by claims management companies to the list of matters that can be regulated under FiSMA. I set out in some detail in a past session of the Committee why I do not believe that the activities of claims management companies should be regulated by the FCA. The key point is that claims management companies are not financial services firms. Yes, it is correct that a substantial proportion of their activity at the moment relates to financial services, but-as the noble Baroness, Lady Sherlock, has pointed out-they may move their focus of attention back to, or on to, something quite different in the future. However, that does not alter the fact that they focus on financial services at the moment. It does not alter the fact that they have no place in the scope of a regulator concerned with financial services and only financial services, which is what we are talking about here.
	I agree, of course, with the noble Lord, Lord Stevenson of Balmacara, that there are a lot of detrimental practices in the sector that need to be tackled. I reiterate that work that is already under way to strengthen the existing regime for the regulation of claims management companies. Before the summer, I flagged that the claims management unit at the Ministry of Justice was doing work to strengthen the conduct of rules governing the sector. That work is proceeding apace and further steps are being taken. I will take back the noble Baroness's comment about resources but I have no evidence that this work is being hampered by inadequate resources.

Baroness Sherlock: I am very grateful to the Minister. If the barrier is not resources, will he advise the Committee of what he thinks it is? If there is no problem, is he satisfied with the regulation at present?

Lord Sassoon: I am not satisfied with the conduct in the industry, which is why in August, since we last debated these matters, as the noble Baroness I am sure is aware, the Ministry of Justice announced that, from April 2013, claims management companies will be banned from offering financial rewards or similar benefits as an inducement to make a claim. I understand why there are concerns but, since we last discussed these matters, there has been significant progress.
	As has already been noted in this debate, proposals have been consulted on to tighten the conduct rules with which all claims management companies must comply as a condition of their licence. The consultation closed on 3 October and the responses are now being considered. Again, the target date for implementation is April 2013. Also from 2013, the Government intend to extend the Legal Ombudsman's jurisdiction to provide an independent complaints and redress service for clients dissatisfied with the service provided to them by the claims management companies with which they have contracted.
	I believe that significant and important work is going on, and that that is the right approach. I hope I have been clear on why I cannot support proposals to make the FCA responsible for claims management regulation, which applies as much now as it will in future. The Government will therefore not be including the activities of claims management companies in the enabling provisions in Clause 6. With reassurance on the first amendment and the explanation of all the work going on more generally, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Stevenson of Balmacara: I thank the Minister for his response. I accept his assurances on Amendment 147L, and I am grateful to him for making it very explicit that the intention and the practice will be that debt management companies will clearly come under the scope of FiSMA and therefore the FCA. Perhaps I may leave with him the thought that there may be a slight divergence of view, unlikely as that may seem, within the Government. As I mentioned in my introductory speech, there is still an ongoing commitment by the Department for Business, Innovation and Skills to produce some sort of protocol which will affect all DMPs. I may write to the Minister about this but it seems to me that where we have an assurance on his behalf that there will be full coverage of DMPs within the scope of the current Bill, as he mentioned, it is not quite clear where BIS and its draft protocol will lie. I should like some assurance on that but I will not contest this on that point.
	If I understood the Minister correctly, I think he was making three points on Amendment 147M. The first is that, in a way that is clear to him but not, I am afraid, to me, claims management companies are not financial services companies. If they are dealing with claims, they are dealing in some sense with a form of financial service. The examples we have had, which move away from pure financial services, concerned whiplash injuries. It seems to me that these companies would not be involved if there was no money somewhere in the circuit. Therefore, if that money is available to an individual who wishes to claim for it and is being assisted by a CMC, under a very broad definition, that would be a financial service.

Lord Sassoon: I do not want to be picky on this point but would the noble Lord, Lord Stevenson of Balmacara, contend that the legal profession, which deals with claims all day every day to recover money for people, should be brought within the regulation of the FCA? I clearly said that at the moment it is dealing with some very important matters which are financial services matters but that is very different from defining a claims management company as a financial service. Is the noble Lord suggesting that lawyers and all sorts of other people who deal with money should be defined as such?

Lord Stevenson of Balmacara: It is not for me to suggest anything. I simply wish to draw out that, simply because of the name or the fact that, on occasion, these companies do not deal strictly with financial services, they are somehow excluded from any regulatory oversight of their activities. Yes, to extend the point as the Minister does makes it seem unlikely, but they deal with financial services at the moment and are unregulated in that sense. I just want to make clear our feeling that this is something to which we may have to return.
	My second point is that the Minister said that detrimental practices exist in the sector and that he was not satisfied with the situation, yet he has decided that there is no need for any further action in the Bill. That seems a little unrelated to the facts as we understand them.
	Thirdly, he made the point, which we accept, that there are other activities going on here. Indeed, we hear that there will be a report shortly on the result of the consultation done by the Ministry of Justice and we may be able to look forward to action in April 2013. Therefore, I think that we need to keep this under review to see whether the movement is in the direction that we wish it to be to focus more clearly on where claims management companies are operating within the financial sector, and that the detrimental practices get sorted out. With those thoughts in mind, I beg leave to withdraw the amendment.
	Amendment 147L withdrawn.
	Amendment 147M not moved.
	Debate on whether Clause 6 should stand part of the Bill.

Baroness Noakes: My Lords, I apologise to the Committee for not having formally given notice that I wish to speak on Clause 6 standing part of the Bill. I discovered my omission only at the weekend, but I have ascertained that it is in order for me to speak at this point and I have informed the Minister's officials, so the Minister should be forearmed. I apologise also to my noble friend Lord Stewartby-had he seen that I wished to debate whether Clause 6 should stand part of the Bill, he might not have digressed earlier into the issues I wish to raise. I also apologise if there is a little repetition of what my noble friend said earlier in what I am about to say.
	I want to talk about the timetable for the transfer of credit regulation activities from the OFT to the FCA which is effected by Clause 6. The issue is not the fact of the transfer-about which I do not think there is any serious concern-but the timing of the changes. I should say that these issues have been raised by the Finance and Leasing Association and I am grateful for its briefing. As I understand it, the Government wish to go live with the FCA taking responsibility with effect from April 2014. They wish at that date to transfer as much as possible of the Consumer Credit Act and the OFT's related guidance into a new rulebook issued by the FCA under FiSMA, as amended by the Bill. This is causing problems to the industry because the new rulebook will not be consulted on until the second half of 2013, with the final rules available only in March 2014. That simply gives the industry too little time to gear up for going live one month later. This is partly a question of time-the industry obviously has to make sure that its processes, its systems and, of course, its staff are prepared for any changes that come out of a new rulebook. I am sure that the Minister will agree that while a lot of preparation can happen during a consultation period, companies cannot deliver final changes until they are clear about what the final changes will be-if, indeed, there are any. One month, as I have said, seems excessively and unreasonably tight.
	In addition, the conversion of the existing rules and guidance might not be as simple as it seems on the surface. Consumer protection under FiSMA and the Consumer Credit Act start from slightly different positions. A lot of FiSMA is about protecting depositors and investors from losing their money when the organisations to which they have entrusted their funds get into difficulty. The Consumer Credit Act places a different kind of risk on the lender-it is starting from a different end of the process. The Consumer Credit Act guidance has been built up over a very considerable period of time-more than 30 years. The concerns are about the sheer time that it would take to convert a pre-existing regime into a new one.
	I understand that the Government have said that they expect most of those changes to be transferred over without significant substantive changes, but if any substantive changes are made, in addition to the question of redrafting into a different format, it is important the consultative process should continue over a proper timescale. For example, I am told that there is a possibility that the appointed representative regime might be applied to consumer credit intermediaries. If that happened-and I am not saying that it is a good or bad thing-it would take the responsibilities of lenders way beyond where they are at the moment. If changes were made, there would be significant implications for the current business model of this kind of lending, which relies on point-of-sale credit transactions through thousands, or hundreds of thousands, of high street retailers and motor dealerships. It is possible that if changes like that were made it could even threaten the existence of this kind of consumer credit business because the model may not be sustainable if the burdens became too great. That would not necessarily be a good thing, because this form of credit is valuable not only to small retailers but also to their customers.
	My point is that this cannot necessarily be rushed through-certainly not with a consultation in late 2013, with the rules issued in March 2014 and implemented one month later. That timetable is entirely in the Government's hands. There are extensive powers under Clause 91 to allow the Government to transfer the Consumer Credit Act powers to the FSA pretty much in whatever way they want to do it, and it is entirely possible to transfer the responsibility to the FCA from 2014, with the existing rules-they can go with new enforcement powers under the Bill-but not to make substantial changes to those rules or convert them to a new FiSMA-style rulebook. That could happen in April 2014, leaving a new rulebook to be developed over a period that allows proper consultation and consideration if any issues arise that would affect the provision of consumer credit in practice. I hope that my noble friend can reassure me that the Government will not let an artificial timetable produce the wrong result in this case.

Lord Sassoon: I am grateful to my noble friend Lady Noakes for raising questions about timetabling. I am very aware that we are putting an enormous burden on industry with many aspects of the implementation of the Bill. Of course, the flood of European regulation does not wait just because we are putting our own house in order in an architectural sense through this Bill. So the Government are very well aware of the issues here.
	Before I deal briefly with the specifics on consumer credit, it may be worth confirming, or announcing, the Government's plans on the cutover date between the FSA and the new authorities. That is something that it is necessary for the industry to have certainty about, even before you get on to consumer credit. To provide the certainty that enables industry and the new authorities to proceed with their planning, we are now sufficiently advanced in the Bill process to announce that our intention is to deliver cutover to the new authorities created by the Bill on 1 April 2013.
	When it comes to consumer credit, we are aware of the need to allow both the FCA and the many firms involved to manage the transition smoothly. We will continue to work closely with the FSA, the OFT and all stakeholders to identify the best approach to implementing the new regime and will consider phased introduction of any new requirements. As my noble friend rightly identifies, Clause 91 allows for significant flexibility in the approach to implementation. We will consider the best approach. As my noble friend knows, we are not final in our thinking on this. We are considering options which could involve temporary grandfathering of firms with a licence under the Consumer Credit Act who wish to transfer to the new FiSMA regime. That would deal with some of the concerns by giving both firms and the regulator more time to prepare. We will, of course, consult on the transition arrangements as well as the detailed proposals for the new FCA regime early in 2013.
	I hope I have been able to reassure my noble friend that we do indeed take seriously these concerns and the timing of the basic cutover. That is why we have put flexibility into the Bill and we will use it for this purpose.
	Clause 6 agreed.
	Clause 7 : Orders under section 22 of FSMA 2000
	Amendment 148
	 Moved by Lord McFall of Alcluith
	148: Clause 7, page 40, line 8, at end insert-
	"( ) a draft of the order has been consulted upon with such persons as the Treasury considers appropriate,"

Lord McFall of Alcluith: My Lords, I will be brief and precise on Amendments 148, 149 and 174 which require consultation by the Treasury on draft orders. Clause 7(3) provides for parliamentary control in relation to the proposed orders under Section 22 of the Financial Services and Markets Act 2000 and proposed new sub-paragraph (2) says that no order should be made before Parliament unless approved by resolution of each House. Given the complexity of the Financial Services Bill and the capacity for muddle and wrong-headedness by all Governments over the past years, I think there is a case for enlarging the consultation.
	In the 1990s, we were in Opposition in the House of Commons and recommended pre-legislative scrutiny. A number of Ministers took up the concept and it worked. I remember being involved in a three-clause Bill in Scotland that related to raves-clubs where young people found themselves dehydrated and where a number of lives were lost. The main clause in that Bill was Clause 2. We did pre-legislative scrutiny and visited many areas of Scotland. We came back and the then Minister, the noble Lord, Lord Selkirk of Douglas, said that the Government had reflected on the matter and that Clause 2 would be removed and redrafted. The lesson is that politicians can frequently get things wrong. Why do we not get this right by taking a little bit more time and extending the consultation? That is the thrust of this amendment.

Lord Peston: My Lords, I am a bit puzzled about the wording in the relevant paragraph. Of course, I agree with what my noble friend says about consultation. However, can the Minister explain why the word "would" appears in line 5 rather than "should"? Even if the Treasury thinks the order would have the described effect, it must certainly believe that it should have the effect. What is the point of the order if it does not achieve what it is trying to achieve? I am a bit puzzled about the word "would". My noble friend's amendment would make much more sense if "should" were inserted instead of "would".
	That leads me to my attempt to get my mind around what would actually happen in this case. It is immensely difficult because the provision substitutes material in this Bill for material in legislation that we do not have before us, which is always a problem. However, if we ask ourselves, "When would any of this order-making process occur?", presumably the answer would be that it would occur when various outside bodies say that this matter is not being regulated, but must be regulated. In other words, what precedes the consultation is the fact that it is not certain at all that the Treasury would take the initiative in this. It is the acting body and is therefore the one that has to act when it comes to producing the orders.
	Therefore, the built-in logic behind the entire new paragraph is the consultation process. Indeed, it is also part of the spirit of the age. One can go further and say that not merely is consultation part of the spirit of the age, but that interested bodies would undoubtedly be aware of these orders. Even if the Treasury does not consult them, those bodies will ensure that the Treasury knows what they think because they will get in touch with the Treasury and say either, "What you are doing is a good thing and we would like to support you", or, "You do not know what you are doing and you ought to do it in a different way". What my noble friend is putting forward helps the Bill to become much more sensible in practical terms, and it would become a fortiori more sensible if we were allowed to amend the language by inserting "should" for "would". I think that would make infinitely more sense.

Lord Davies of Oldham: My Lords, I am grateful to both my noble friends who have spoken on this issue and very much agree with the arguments they presented. Amendment 149AB in my name merely seeks to take this matter one obvious stage further. My noble friends have put the emphasis on effective consultation so that the Treasury presents a position that is the result of informed judgment. However, the other part of informed judgment is that Parliament should reach a decision on what the Treasury has arrived at regarding such an important matter as the powers to amend Schedule 6 of the Financial Services and Markets Act. The Bill significantly changes the architecture, which is a phrase frequently used by the Minister. With our amendment, we are merely seeking assurance that, after effective consultation and deliberation by the Treasury, the orders are put before Parliament, whereby its views can be heard before anything comes into effect.

Lord Sassoon: My Lords, I shall try to assure the Committee that none of the amendments is necessary or appropriate. If the noble Lord, Lord Peston, will forgive me, I am not sure that we have a procedure for oral amendments. No doubt we shall have some interesting discussions about "must" and "may" later in this Committee session. Looking at this paragraph, in my opinion, x or y "will" be the case and, when written the other way, the word turns into "would". If an opinion is that something will be the case, then "would" rather than "should" is entirely appropriate here. However, I have now fallen into the trap of getting into a debate on this non-amendment. Of course, if the noble Lord really insists, what can I do but give way?

Lord Peston: If the Minister will read a few lines further on in his own Bill, he will see the words,
	"by reason of urgency, it is necessary to make the order".
	That can make sense only if the word "should" is used. It cannot possibly be a meaningful part of the Bill if the word "would" is used. The Treasury must believe that there is a reason of urgency for this to take place and so we infer that "should" is the right word. Otherwise, reasons do not apply, and it reads more like something happening by chance, so let it happen. However, that is not what this bit of the Bill is about. I hate to tell the noble Lord, but on this point I think I understand his Bill better than he does.

Lord Sassoon: On this occasion, I am quite confident in my use of the English language, even if the noble Lord understands the Bill better. Outside the Chamber we can debate who understands the Bill better. I am quite clear that "would" is the correct word here because it refers to something which is expected to have the effect of extending regulation. I shall not detain the Committee on what we are not discussing, so let us talk about what we are discussing.
	Amendment 148 would require the Treasury to consult on the order made under Section 22 where it would result in an unregulated activity becoming regulated. The Government recognise the best practice established in this area by the Department for Business's code of practice on consultation. I can assure the Committee that the Government will continue to observe the code wherever possible when conducting formal written consultations. However, I do not think that it would be appropriate to write this requirement into this legislation, as it is not written into many other pieces of legislation. Indeed, the Government generally consult on changes to the regulated activities order. I cannot find any case to date where the Government have introduced substantive changes without consultation. Having said that, it may not be appropriate in all cases: for example, if an urgent change needs to be made to bring an activity into prudential regulation that may cause a financial stability risk. For that additional reason, I think it would be wrong to require consultation.
	Amendment 149 would require the Treasury to consult on the first Section 22A order and any subsequent orders which amend the scope of PRA regulation or which amend primary legislation. The Section 22A order sets out the scope of PRA regulation. Here, too, the Government agree-and I am happy to restate it-that it is preferable to consult, and indeed the Treasury will be consulting on a draft of the Section 22A order shortly. I do not think it is necessary to write such requirements into legislation.
	It is also worth the Committee noting that both of these types of orders would be subject to the affirmative procedure in all cases. Parliament will always have the chance to consider these amendments, and to consider whether the Government have presented suitable evidence-through a consultation in the normal event-of the need for any change. I think that that backstop is an important point here.
	I turn now to Amendment 149AB in the name of the noble Lord, Lord Davies of Oldham. Although he has tabled, I think, only one amendment out of the many hundreds that this Committee has already considered and because I made a concession on it, his batting order is going down from a 100% to a 50% success rate at a stroke. I agree with the noble Lord that orders made by the Treasury that amend Schedule 6 should be subject to the affirmative procedure as they concern changes to the PRA's and FCA's threshold conditions, which are the cornerstones of each authority's regulatory approach. However, we have already provided for this. Clause 46(2) of the Bill, on page 130, includes orders made under Section 55C in the list of orders that should be subject to the affirmative procedure. Therefore it is a simple matter to understand that Amendment 149AB is not needed.
	I move to Amendment 174, tabled by the noble Lord, Lord McFall of Alcluith. I will briefly explain the purpose of new Section 141A of FSMA. It gives the Treasury and the Secretary of State a narrow and technical order-making power to amend legislation that makes reference to the rules of either regulator or to guidance issued by the FCA where the regulator has altered or revoked its rules. This is a sensible approach to ensuring that references to rules and guidance made by the regulator in legislation remain accurate and up to date.
	It would not be appropriate to require the Treasury or the Secretary of State to engage in consultations before making amendments to legislation that are a direct consequence of changes to rules or guidance made by the regulator. This would cause unhelpful delays to the process of updating the affected legislation, causing possible confusion and uncertainty for firms and other persons affected. Of course, except in cases of urgency there will already have been consultation on the substantive changes being made to the rules or guidance, as this is required of the regulators.
	I hope that with those explanations the noble Lord, Lord McFall, will feel able to withdraw his amendment.

Lord McFall of Alcluith: My Lords, it was not my primary aim to promote a deeper understanding of the English language but I did enjoy the exchanges. However, I now beg leave to withdraw the amendment.
	Amendment 148 withdrawn.
	Clause 7 agreed.
	Clause 8 : Designation of activities requiring prudential regulation by PRA
	Amendment 149 not moved.
	Clause 8 agreed.
	Clause 9 : Permission to carry on regulated activities
	Amendment 149A not moved.
	Amendment 149AA
	 Moved by Lord Eatwell
	149AA: Clause 9, page 42, line 28, at end insert-
	"( ) The regulators must co-ordinate their procedures for, and provide clear and detailed guidance on, the processes for applying for, varying and cancelling permission that are applicable to authorised persons regulated by both PRA and the FCA."

Lord Eatwell: My Lords, I will speak also to Amendment 149AC. Both amendments concern the process of applying to carry on regulated activities. I am sure that the Minister is aware that there is considerable disquiet at the moment about the very long delays associated with the application to carry on regulated activities. Undoubtedly this is having a deleterious areas effect on competition in financial services, and on what we might call the reformation of the financial services industry.
	No doubt these delays are partly as a result of the fact that the legislation that will cover these organisations is in process, and therefore the appropriate officials at the FSA feel somewhat constrained in their ability to make decisions on what can sometimes be quite sensitive and contentious issues. None the less, those delays are very unfortunate. The two amendments are designed to facilitate the process of application and to ensure that it will be rather more efficient when the duties are passed over to the FCA and/or the PRA on what I have noticed is, rather unfortunately, All Fools Day.
	Amendment 149AA calls for co-ordination between the FCA and the PRA when processing applications for permission to carry out regulated activities, in particular giving clear and detailed guidance-something that is not always in evidence at the moment-on applying for, varying or cancelling permission. I am particularly concerned about applying for permission.
	It is important that when the responsibility is split, as it must inevitably be between the regulator responsible for risk, the PRA, and the regulator responsible for conduct of business, the FCA, that the co-ordination between them when dealing with new applicants is as clear, transparent and carefully guided as possible. Amendment 149AA achieves exactly that-at least that is what it seeks to do-and if it does not achieve it, perhaps the noble Lord will tell us how he intends to achieve the same objective.
	Amendment 149AC seeks to modernise and future-proof elements of the application process. The Bill does not refer to decisions previously made by the European Union regulatory authorities when referring to non-EEA firms and the weight to be attached to opinions on any non-EEA firms wishing to operate in this jurisdiction. The European Union regulatory authorities are going to be the major regulatory rule makers in this area, so leaving them out at this stage will limit and inhibit operation of the Bill in the future. We know that the European authorities will become important in this respect. Surely it is therefore imperative that some weight be given in the Bill to their opinion when non-EEA firms are likely to be offered the privilege of acting within this jurisdiction. I beg to move.

Baroness Kramer: My Lords, I want to speak very briefly to Amendment 150B in this group. As your Lordships will know, the Bill amends Section 55 of FiSMA. Section 55Q as now in the Bill refers to the,
	"Exercise of power in support of overseas regulator".
	I would like the Minister to clarify the definition of "overseas regulator" because neither I nor some of those who are much more sophisticated than me in trying to understand regulation are fully certain whether that definition would include an agency or instrumentality of the European Union such as the three supervisory authorities-the ESMA, the EBA and the EIOPA-which have direct regulatory powers in their own right. All I am asking for at this point is some clarification as to whether these EU agencies or instrumentalities are encompassed in this and if they are not, why not.

Lord McFall of Alcluith: I will briefly refer to Amendments 151 and 152. They oblige the regulator to have regard to those associated with a person who has applied for, or has been given, permission. We realise that proposed new Section 55R provides that when considering previous issues the regulator may have regard to the applicants' relationship. I suggest that this provision should be mandatory rather than discretionary and that relationships should be defined as including family, business or other associations. It would bring more clarity to the interpretation of this clause.

Lord Newby: My Lords, I agree strongly with the motivation behind the amendments of the noble Lord, Lord Eatwell. The process for approving new entrants to the market should be streamlined to the maximum possible extent because it is clearly a flaw in the current financial services market that while in many sectors there is strong competition, in some, particularly banking, we wish to see significantly more competition. In terms of giving an impetus to the speedy processing of applications, we strongly support his view. However, I hope that I can persuade him that the Bill already makes it clear how the two regulatory bodies are going to deal with applications for firms that will be jointly regulated. In Clause 9, proposed new Sections 55E to 55G set out in detail who is to determine applications for authorisation, while new Sections 55U to 55Z1 set out the detail of the procedure which the regulators have to follow. We have already attempted to clarify who does what.
	Those who are applying to become a dual-regulated firm are required to make a single application for authorisation to the PRA, and there will be a single administrative process. The PRA and the FCA will be under a duty to co-ordinate which will cover all of their functions, including those related to authorisations. They are under a duty to set out in their memorandum of understanding, in high level terms, how that co-ordination will be delivered. To deliver the duty to co-ordinate, the two authorities are required to put processes in place that will allow for efficient co-ordination. They also need to establish a process for authorisation and variation of permission, and to communicate that to firms. The FSA does this at present, and guidance is available on authorisation from its website. I do not think there is a need for an express requirement in legislation about exactly what the regulators should publish.
	I shall move on to Amendment 149AC. We are aware that the ESAs are to assist in preparing equivalence decisions relating to supervisor regimes in third countries under relevant sectoral legislation, such as Article 33 of the ESMA regulation. Where EU law provides for the ESAs to have a role in determining equivalence of an overseas regulator, of course the regulators must comply with EU law and recognise that decision. However, we believe that it would be inappropriate to extend the role of the ESAs by requiring our regulators to have regard to any equivalence decisions they make in contexts that are not required by EU law. But, of course, the question is really one of whether the regulatory bodies are going to take account of the overseas regulators supervising those firms which are applying for passporting into the UK. When the FCA or the PRA is assessing a firm seeking to passport in to the UK from outside the EEA, the opinion of an overseas regulator that knows the firm, its operations and its management extremely well is quite likely to be helpful. The FCA and the PRA must also consider how the overseas regulator supervises the firm and take this into account, but in doing so, they may well wish to consider any view that the EU regulatory authorities may have about the overseas regulator.
	I turn now to Amendment 150B, spoken to by my noble friend Lady Kramer. The Bill already provides that the regulators may exercise their powers of intervention, including the power to vary permission, at the request of an overseas regulator. In considering any such request, the regulators are required to have regard to whether they are required by EU law to assist the overseas regulator. The relations between the FCA and PRA and the European supervisory authorities, which are not technically regulators in the same way, are set out comprehensively in primary EU law. For example, Regulation 1093/2010/EU establishing the European Banking Authority runs to 82 articles and covers in detail matters such as the role of the EBA in settling disagreements between national competent authorities, the limited circumstances in which the EBA may direct the national competent authorities to take action, the status of the national competent authority when it attends the EBA and the sharing of information between EBA and the national competent authorities. There is considerable scope for our regulators to work with the European supervisory authorities established in EU law. So while I agree with the importance of the two sets of bodies working closely together, I do not think that this amendment is strictly necessary.
	We now come to Amendment 151 tabled by the noble Lord, Lord McFall of Alcluith, which, sadly, takes us back to a discussion of the use of the English language. I say sadly because the debate about whether "may" or "must" should be used has exercised some of the finest brains in the Treasury to a greater extent than almost any other provision in the Bill. I found myself getting drawn into the debate and I became extremely enthusiastic about something that I was then persuaded was not of as much significance as I had originally thought.
	Amendment 151 is one of the cases where we have looked very carefully at whether we should change "may" to "must". We have come to the conclusion that to do so would impose a disproportionate and unnecessary burden on the regulator and, indirectly, on existing and potential authorised persons. The reason for this conclusion is that the amendment taken literally-and people do sometimes take these things extremely literally-would require the regulator to consider, when taking a decision on an application for permission or whether to vary or cancel a permission or to impose a requirement on a firm, each relationship which was "relevant" to the matter in hand. The amendment does not introduce any kind of materiality thresholds; all relevant relationships would have to be considered.
	Even for a relatively simple provider such as a sole trader IFA, the range of relationships that are potentially relevant to the matter could be very significant. For a complex firm such as Barclays, the range of relevant relationships would be absolutely mind-boggling. Therefore, we think it is very important to retain the "may" to keep proportionality to the level of relationships that would have to be investigated.

Lord Peston: My Lords, am I right that in thinking that the noble Lord is talking about the "may" on line 27 and that he is well aware that there is a "must" on line 33? I get a bit bored with mays and musts although, I have had my fair share of them. However, I cannot make any sense of them, and if I switched them around, the Bill would look to me just as sensible or not. Could he tell us why the "must" is there?
	My other question relates to the point that my noble friend Lord Eatwell made on the importance of regulatory authorities abroad. Is the position at present symmetric? In their regulations and regulated activities elsewhere, do they have a series of mays and musts to take account of what our regulatory authorities say about our firms? In other words, is there any danger that people overseas will prevent our firms competing with their firms under regulations where we are following the quite correct line-which I totally support-that competition is generally to the good? Therefore, we are broadly saying that we must welcome overseas competition rather than reject it. How much danger are we in from the mercantilist views that we know dominate French policy-making and that of others?

Lord Newby: My Lords, I can deal with the first part of that intervention more quickly and easily than the second. The first "must" in subsection (2) is there because it is an EU legal requirement. If we are asked to do something, we have to do it; we do not have the option of not doing it. There is a good reason for a "must" there.
	With regard to the noble Lord's second point, I was speculating about the Romanian or Hungarian or Finnish languages as he was speaking and wondering whether there was the same absolute distinction between "may" and "must" in every case. I am not an expert in every bit of regulation in every member state. I realise that this is a major deficiency but I do not think that it pertains very strongly to the amendments before us today. For the second time, the noble Lord has raised a potential other amendment that is not on the Marshalled List. If he will excuse me, I will go back to concentrating on the ones that are.

Lord Desai: Perhaps I may say one word in favour of my noble friend's amendment. It strikes me that there may be what we call a multicultural problem here, that in an investment situation relatives are defined much more broadly in certain communities than others. The noble Lord may be right that "may" will do and "must" will not do, but I have been asked to be non-executive director of some Indian companies and the number of relations they ask me to certify who do not hold assets in that company runs to something like 30. I hope that the regulators are aware that "must" may be a better word than "may", but I concede the point, as long as the noble Lord assures me that the regulators are aware of the multicultural problem.

Lord Newby: I am sure that the regulators are aware of the multicultural problem, but the example given by the noble Lord absolutely exemplifies the problem. If one had a single-trader IFA who came from a particular culture and had a very large extended family, it would be at a disproportionate cost that the regulator looked at every single relationship that he or she had, which could run to many hundreds.

Lord Desai: Until it goes wrong.

Lord Newby: That is why the regulator has to look at relevant and appropriate relationships rather than everybody who could be conceivably considered to have a relationship with that regulated entity or individual.
	Amendment 152 was also put forward by the noble Lord, Lord McFall. I hope that I can persuade the Committee that, again, this is unnecessary. It is important that those to whom permission is granted are not subject to influences that may act in a way which is not in the best interests of potential clients. That is why new Section 55R(1) is in the Bill. The current text in new Section 55R(1) refers to "relationship". It deliberately does not specify the nature or type of the relationship, so that out of all conceivable relationships-including family, business, and other associations-the regulators can exercise their judgment on which relationships should be investigated and which should be factored in to the instances of decision-making set out in new Section 55R(1). This reiterates the point that I have just been making to the noble Lord, Lord Desai, that a degree of judgment needs to be exercised by the regulator over which relationships are taken into account.
	However, I assure the noble Lord, Lord McFall, that the specific types of relationships to which his amendments refer will be among those considered by the regulator and will be looked at where appropriate. Therefore, I hope that the noble Lord will be satisfied that the amendments are unnecessary.

Lord Eatwell: My Lords, I welcome the noble Lord, Lord Newby, to the consideration of the Bill but I suggest that he has failed to take the point of Amendment 149AA. His argument consisted of two points. First, he argued that there was sufficient requirement for the PRA and the FCA to work together in giving permissions under new Sections 55E, 55F and 55G. Secondly, he argued, extraordinarily, that it was not the task of the Bill to require either the PRA or the FCA to publish guidance on these matters. One of the great failures in the current process in giving permissions is the inadequate guidance which firms have in preparing their permissions. It is one reason why the permission process has become so extended and has so limited the development of competition in financial services which we would all like to see. In particular-

Lord Newby: What I said was that at present the FSA does make guidance available on its website. The new regulators intend to do the same. For that reason, I did not think there was a need for an express requirement in the Bill to do so.

Lord Eatwell: They may intend to do lots of things, but it would be nice if the Bill could actually require them to do so in this particular case. However, the more important point I would like the noble Lord to help me with is that Amendment 149A requires the collaborative activity of the FCA and the PRA to publish guidance for applicants, so that an applicant is not caught between two stools, continuously going backwards and forwards between one and the other in the application process. If this is already in new Sections 55E, 55F, and 55G, can the noble Lord point out to me precisely where this requirement appears?

Lord Newby: The PRA and FCA are under a duty to co-ordinate covering all their functions, including those related to authorisations. They are under a duty to set out in their MoU how that co-ordination will be delivered. Therefore, the noble Lord's concern that there will not be adequate co-ordination, and that even if there were, it might not be readily available to regulated or would-be regulated firms, is mistaken. There is recognition that there is a potential problem, obviously, with two regulators, but the Bill and the MoU seek specifically to address those problems.

Lord Eatwell: Pushing things into the MoU is unsatisfactory, particularly when the noble Lord pleaded in aid new Sections 55E, 55F, 55G, and so on. It does seem that there is a problem with the whole current application process. Anybody who has been involved with, or been approached by, people involved in the application process knows that as it stands it is not working very well. Once we have two regulators responsible for the approval of applications, there is the possibility that it will work less well, which will not be good for the health and vitality of financial services, particularly banking, in this country. However, we will no doubt return to this matter at a later stage. In the mean time, I beg leave to withdraw the amendment.
	Amendment 149AA withdrawn.
	Amendments 149AB and 149AC not moved.
	Amendment 149B
	 Moved by Lord Flight
	149B: Clause 9, page 44, line 17, after "FCA" insert "(which shall not be required where the applicant seeks permission to carry on the regulated activity of accepting deposits)"

Lord Flight: My Lords, I have previously raised the issue of the potential costs of the regulatory regime, which will ultimately fall on clients. I have also raised the common sense aspect. I suggest in part a reply to the very fair points raised by the noble Lord, Lord Eatwell: why on earth should both regulators have to be involved with the approval of a bank? Approval of a bank is fundamentally about its capital, the soundness of its shareholders and the propriety of its directors. The approval stage is not really about whether what it intends to do meets all the potential consumer interest elements; it is about its safety and its propriety.
	In essence, the amendments in my name would remove the need for the PRA to consult the FCA over the authorising of a bank. The subsequent amendments make corresponding alteration to the regulatory actions, such as variation of permission, cancellation of permission and imposition of requirements.
	I think that I may be the only Member of this House present today who has been through a bank application process with the FSA, having had responsibility for steering the Metro Bank application. That is an issue on which I could speak in greater depth. I was surprised to find someone from BIS contact me and ask whether they could come along and talk to me about it. In many ways, the crisis was at its height at that time and one can understand the FSA being extremely cautious and changing its approach, but taking a year and a half was quite excessive. There is already much improvement in the way in which the FSA is looking to deal with banking applications, but involving another organisation that does not have prime responsibility for banking safety is unnecessary from the perspective both of costs and of the delay and complication involved in meeting the key elements required for approval of a banking licence.

Lord Sassoon: As my noble friend Lord Flight has explained, his amendments would remove the requirement for the FCA to consent to authorisation decisions taken by the PRA relating to banks and other deposit-takers, including the decision to grant or remove permission. I should say at the outset that I cannot accept this group of amendments.
	My noble friend spoke about his direct personal experience, of which I am aware, of going through an authorisation with the FSA. He will understand from that that, when the FSA approaches the authorisation of a bank or other deposit-taker, it now looks both at matters that will be within the ambit of the PRA and at matters that will be within the ambit of the FCA. As he will understand, if it was to be a matter only for the PRA, it would be an authorisation process that dropped a certain amount of what is done at the moment. I know full well that the FSA's authorisation processes were becoming very slow. I am glad that my noble friend acknowledged that it has worked hard at improving them because it is important that the barriers to new entry are lowered as far as possible.
	However, I should explain why I believe that it would be unsafe to drop the FCA leg of the authorisation process. Yes, the process should be improved in the way that is happening already, but half of it should not be dropped. The PRA will be responsible, as we know, for the prudential regulation of deposit-takers, including banks, but with the FCA being responsible for the conduct regulation of such firms. The authorisation process for a deposit-taker will be led by the PRA, but the FCA's consent will be required before an approval can be granted and before a firm can acquire permission for any new activities once it has been authorised. It will be a dual authorisation and regulation process, as we know.
	It is right that these matters should be looked at before a firm starts to get into business, rather than leaving it, as my noble friend suggests, to afterwards, because it is going to be much more costly to address issues within firms following authorisation if they were to engage in activities that the FCA believed to be inappropriate in any way. This is particularly important for the FCA, which is going to be looking at many more firms than the PRA. It is not only for the safety of the system but it will ultimately lower the cost in terms of the regulatory burden on firms and, as my noble friend says, in the end on the users of financial services if problems can be nipped in the bud or sorted out before they become an issue.
	One only has to look at and think about the example of PPI. I know that it is not precisely the point that my noble friend makes, but PPI shows, lest we forget it, that deposit-takers can put consumers at much as risk as any other part of the industry, if their conduct is not appropriate. The FCA will have a significant role in the authorisation process, in assessing the range of products being proposed by the applicant, its systems and controls, and its processes for treating customers fairly, including dealing with complaints, ensuring that the business is not being used for a purpose connected with financial crime and promoting effective competition in the interests of consumers.
	The Government believe that these issues need to be addressed up front as an absolute requirement. As a practical matter, if we went down the route that my noble friend suggests, dealing with problems as they came up afterwards, it not only would be to the detriment of consumers but would ultimately be more costly in terms of the regulatory burden. I hope that with those explanations my noble friend will be able to withdraw his amendment.

Lord Flight: My Lords, I suggest that the areas that the Minister referred to are already in the rulebook and in the legislation. Anyone going into business knows that they have to be good boys and behave appropriately. Authorisation of a bank at the beginning is concerned with the essentials: is there enough capital, is the banking plan safe and are the proposed directors proper people? That is what the FSA has now pulled itself back to looking at. I do not think that the FSA-while it still exists-is looking at all these other issues; it is looking at the fundamentals of a bank.
	In my view, there is a muddle between the ongoing regulation and what matters up front. I remain of the view that there is a very strong common-sense and functional case for limiting the approval and granting of licences for banks to the PRA. I will add that I have found that a number of heavies, from both the regulatory world and related territories, strongly agree with this point and perceive dualling it up as adding to both costs and complications. However, I am sure that we can return to this matter on Report and hope I may persuade the noble Lord to think again on this point. On that basis, I beg leave to withdraw.
	Amendment 149B withdrawn.
	Amendments 149C to 149G not moved.
	Amendment 149H
	 Moved by Lord Newby
	149H: Clause 9, page 48, line 8, at end insert-
	"(6A) Without prejudice to the generality of subsections (1) and (2), the FCA may, in relation to an authorised person who has permission to carry on the regulated activity specified in article 24A of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (which relates to bids in emission allowance auctions), exercise its power under this section to vary the Part 4A permission of the person concerned by removing that activity from those to which the permission relates if it appears to the FCA that the person has seriously and systematically infringed the provisions of paragraph 2 or 3 of Article 59 of the emission allowance auctioning regulation."

Lord Newby: My Lords, this is a small group of minor and technical government amendments. They serve, among other things, to update the Bill to reflect European legislation and update the schedule that makes consequential amendments to legislation as a result of the changes introduced by the Bill.
	Perhaps I may speak briefly about two sets of amendments in this group. The Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2012 has recently come into force to implement the requirement in Article 18 of the Commission regulation 1031/2010 on the timing, administration and other aspects of the auctioning of greenhouse emission allowances. The order amended FiSMA to enable the FCA to authorise certain categories of persons to make them eligible to bid in auctions of emissions allowances on their own account or for clients under the EU emissions trading system.
	Amendments 149H, 173ZAA, 173AAA, 183ZA, 183ZB, 183ZC and 183ZD amend the Bill to ensure that where the order has amended FiSMA, those provisions are reflected in the Bill. Amendments 187TB, 187TC, and 187TD make some technical clarifications to the provisions in FiSMA relating to the Lloyd's insurance market. They make no changes of substance; there are no underlying changes in policy. Amendment 187TD replaces a reference to Part 10 of FiSMA with a reference to Part 9A of FiSMA. Clause 22 of the Bill replaces the rule-making provisions of Part 10 of FiSMA with new provisions in a new Part 9A of FiSMA. This amendment simply updates a cross-reference to those provisions in Section 316.
	Government Amendment 187VA is a minor and technical amendment which maintains the current position under FiSMA whereby the FSA may disclose information obtained by HMRC for the purposes of a criminal prosecution without the consent of HMRC. Government Amendment 193B is a minor technical amendment to remove an unnecessary reference to Section 328 of FiSMA. Government Amendments 193C and 193D make minor changes to the technical provisions of the Bill relating to the special resolution regime and bank administration. Specifically, Amendment 193C relates to a situation where the holding company of a failing bank has been taken into public ownership. The amendment will allow shares that have been transferred, whether within public ownership or to a private sector purchaser, to be transferred back to their original ownership.
	Amendment 193D is a consequential amendment, reflecting the insertion of a new Section 81A into the Banking Act by Clause 86(2). Amendments 198A, 200A and 200B amend Schedule 18 to include further consequential amendments required by the Bill. They amend references to the FSA and to Part 4 of FiSMA, which is repealed by this Bill.
	Amendment 198A is a consequential amendment to the Lloyd's Act 1982. The Act currently lists FSA-approved persons as one of a list of specified persons who may sit on the disciplinary committee. The amendment replaces FSA approval with FCA or PRA approval.
	Amendment 200A makes a consequential amendment to the Charities and Trustee Investment (Scotland) Act 2005 to update the reference to Part 4 of FiSMA, with the new Part 4A. Finally, Amendment 200B adds the Prudential Regulation Authority and the Financial Conduct Authority to the list of bodies that are required to comply with standards of record keeping in the Welsh language. The Bank of England is already listed. Noble Lords will be relieved to hear that I do not plan to attempt to pronounce the translation of the two authorities to the House. I beg to move.

Lord Tunnicliffe: My Lords, we are very happy, in a sense, to accept the blanket assurance that these amendments are minor and technical and we will not probe them in any detail. However, we are going to have a host of government amendments to the Bill, as was discussed earlier. We did, on this first day back, request a written explanation of this group of amendments so that we could study them at our leisure before the Committee met. Unfortunately, there has been no response to that request. It is important that the Government get into the habit of extremely comprehensive supporting documentation for their amendments. Therefore, I will study with care what the noble Lord has said and make sure that I can be comfortable that they are minor and technical, but it would have been much better if we had had a response to our request. I would value an assurance from the noble Lord that, as these amendments come along over the rest of the Bill-we will all try to work together to ensure the success of debates about new government amendments-the Government will facilitate those debates by providing proper documentary support.

Lord Newby: I hope I can give the noble Lord two assurances. First, I can assure him that the amendments are indeed technical and have no policy substance attached to them. I also assure him that, wherever possible, we will make available adequate written information about government amendments in good time so that people can look at them and ensure they are what they say on the tin.
	Amendment 149H agreed.
	Amendment 150
	 Moved by Lord McFall of Alcluith
	150: Clause 9, page 49, line 9, after "if" insert "after investigation"

Lord McFall of Alcluith: My Lords, there are 14 amendments in total here, and I will not be speaking to them all; but if I could characterise them, the three words I would use would be investigation, consultation and reasons for the Financial Conduct Authority. Underpinning that are the concepts of natural justice and the law of judicial review. Given the problems that the FCA has experienced with investigations in the past, both with the Royal Bank of Scotland and the HBOS decision, there are many questions arising from that, not least on the HBOS decision. The FCA needs to be clearer and have more consultation on its relations with financial service companies because the status of the FCA is at stake here. These amendments refer to FCA investigations and providing the reasons and the consultation for them.

Baroness Hayter of Kentish Town: My Lords, I rise to speak on the amendments in this group, and in particular on Amendment 165ZA, standing in the name of my noble friend Lord Davies of Oldham, and Amendment 170ZA in my name. As my noble friend Lord McFall has said, these amendments are essentially about transparency, before and after the event, and consultation. They are also about the publication of findings and reasons, including to Parliament.
	Amendment 165ZA would require, where a prohibition order is made, that the regulator publish the reasons for this and that the individual appears on the list of people subject to prohibition orders on the Treasury website. This is key. It is not simply to promote good practice by making clear what constitutes the contrary, but also to enable investors and others easily to identify who has been subject to such an order.
	My family recently had to check out a hitherto chartered accountant, only to find it impossible to discover from the ICAEW's website whether he had actually been removed from the register-which, in fact, he had been. The institute finally said it would sell us a list of those who had been so removed, but it should not really be necessary to go through that to discover who has been struck off. We certainly do not want that sort of opacity from the new regulators.
	The amendment is really about open access. I assume that it will not divide us across the Committee. On this very proposal, Matthew Hancock-admittedly before he was a Minister, albeit that he was very close to a certain senior one-in the other place said that,
	"the principle that prohibition orders on people who are not fit and proper persons should be published is crucial ... Prohibition must not only be a sanction for past irresponsible behaviour, but a deterrent for future irresponsible behaviour. That change in behaviour, by ensuring that sanctions are strong enough to change the culture within finance, is ... extremely important. It is one of the key lessons from the financial crisis. ... the point of prohibition is not only ... to stop the actions of those who have ... committed acts that make them not fit and proper, but to demonstrate the bounds of behaviour that are deemed responsible and reasonable within authorised firms".-[Official Report, Commons, Financial Services Bill Committee, 6/3/12; col. 384.]
	The then Minister, Mark Hoban, agreed,
	"that prohibition is both a punishment and a deterrent, and that the risk of being deprived of one's livelihood is a deterrent to those who transgress".-[Official Report, Commons, Financial Services Bill Committee, 6/3/12; col. 387.]
	Clearly, publicity is key to that.
	Amendment 170ZA in my name requires the FCA to give a copy of its policy on penalties relating to the discipline of sponsors not just to the Treasury but also to Parliament. Clearly, this is about improving parliamentary accountability and scrutiny of the FCA, its reports and how it carries out its functions. It is not enough to leave the FCA or the Treasury to publish statements to the wider public without laying them before the public's elected representatives in Parliament. Furthermore, we do not want the new regulators simply to become creatures of the Treasury but we want to submit their work also to parliamentary scrutiny.
	The amendments in the name of my noble friend Lord McFall of Alcluith are similarly about openness and transparency. They require appropriate consultation by the authorities, proper investigation before action is taken and then explanations provided in due course. We commend these amendments to the Committee. There is also an amendment in this group in the name of the noble Lord, Lord Hodgson, which appears to make good sense. We look forward to the Minister's response to that.

Lord Newby: My Lords, as both noble Lords have said, these amendments are about fairness and transparency. The regulators will have wide powers to take action against firms. Therefore, it is right to be sure that the Bill requires the regulators to use those powers in a fair and proper manner. I therefore very much agree with the thinking behind the majority, if not all, of these amendments. Perhaps noble Lords will forgive me if I explain why I think that they are either unnecessary or inappropriate.
	Let me deal first with Amendments 150, 165, 168, 171, 173, 177 and 178, which are all in the name of the noble Lord, Lord McFall. These amendments would require the regulator to carry out an investigation before taking regulatory action. I agree that the regulators should not take invasive regulatory action against a firm unless they have carried out a thorough investigation. I also agree with the thinking behind Amendments 169, 170, 172, 175, 179 and 180; namely, that the regulator should give a statement of reasons when it takes regulatory action. However, these amendments are unnecessary as these are already requirements under existing law and the Financial Services Bill will not change that position.
	First, as a matter of ordinary administrative law, a regulator could not take action against any person unless it had sufficient evidence for doing so. This would normally mean that it had undertaken an investigation or an inquiry of some kind. The regulator cannot act on a whim. The FSA's enforcement manual sets out at great length how its investigation procedures are fair and appropriate.
	Secondly, Sections 387 and 388 of FiSMA already require warning and decision notices to give the regulator's reasons for the action it proposes or the decision it has taken. There are similar requirements in the new provisions inserted by this Bill for other notices where that is appropriate. Of course, if the person concerned disagreed with the reasons that the regulator gave, he or she could challenge the action or decision before the tribunal.
	Amendment 176 seeks to compel each of the regulators to consult with persons whom it considers appropriate when preparing and issuing a statement of policy with respect to the imposition of penalties and the amount of penalties under the new powers in new Part 12A of FiSMA in relation to unregulated holding companies. Again, I entirely agree with the spirit of the amendment: the regulators should consult on their statements of policy. But let me reassure the noble Lord, Lord McFall, that this amendment is not required, as new Section 192N(9) already requires the regulators to consult when preparing and issuing a statement of policy.
	The purpose of Amendment 165ZA in the name of the noble Lord, Lord Davies, is to require the regulators to publish explanations of decisions to issue prohibition notices to individuals and to require the Treasury to publish a list of individuals subject to such notices on its website. As I have said, regulators ought to give explanations of their actions and I do not think anyone would dispute the need for the identity of persons subject to prohibition orders from the regulators to be made known. That is already the position under FiSMA and the Financial Services Bill will not change that.
	First, when the FSA seeks to prohibit someone working in the financial services industry, FiSMA already requires the FSA to give reasons in the notices for the decisions it is proposing to take or has taken relating to the prohibition. Final notices are generally published by the FSA and decision notices may also be published. They are, of course, published on the FSA website and I encourage your Lordships to look at these notices to see the detailed explanations that the FSA gives for its decisions. On the second limb of the amendment, FiSMA already requires the FSA to maintain a publicly available record of a number of matters, including of individuals to whom a prohibition order relates. This deals specifically with the point made by the noble Baroness. The FCA will keep these records in future and the Bill, in paragraph 17 of Schedule 12, also amends FiSMA to require the PRA to assist the FCA in keeping the record up to date. In particular, the PRA will be required to notify the FCA if it makes a prohibition order, so that the FCA can update the register.
	Amendment 170ZA in the name of the noble Baroness, Lady Hayter, would require the Treasury to lay before Parliament any statements of policy concerning penalties to be imposed on sponsors made by the FCA under new Section 88C, and sent to the Treasury under new Section 88C(8). New Section 88C follows the model of other sections in FiSMA about statements of policy on penalties and these do not require such statements to be laid before Parliament. I think there may be a misunderstanding about the nature and role of these statements and I shall explain why the Government do not think it appropriate for statements of policy of this kind to be laid before Parliament.
	No one disagrees, of course, with the proposition that certain important reports and other documents that the FCA or PRA give to the Treasury should be laid before Parliament, but the statement of policy issued by the FCA under Section 88C, or similar sections, is not such a report. It is more akin to the guidance issued under FiSMA. This explains why the procedure in new Section 88D, which the FCA must follow before it issues a statement, is essentially the same as the procedure when the FCA issues guidance, which is now set out in new Section 139A. The Treasury must be notified of any new guidance or changes to existing guidance but is not responsible for publishing it, because it will have already been published by the FCA, and the Treasury does not have to lay copies of FSA guidance before Parliament at present. That has never been thought necessary or appropriate-they are all available on the FSA website. I do not think it would be appropriate to change that approach now, either in relation to new Section 88C or elsewhere. The sheer volume of material is an issue, but the real point is that the FCA's ordinary rules, guidance and statements of policy are not matters that would normally be of routine concern to Parliament: they are extremely dry documents of concern mainly to practitioners and advisers. I hope that, in the light of my explanation, the noble Baroness will be satisfied with what the Government propose.

Lord McFall of Alcluith: I beg leave to withdraw the amendment.
	Amendment 150 withdrawn.
	Amendments 150A to 152A not moved.
	Amendment 153
	 Moved by Lord Sassoon
	153: Clause 9, page 58, line 40, at end insert-
	"Notification
	55Z1 Notification of ESMA
	A regulator must notify ESMA of-
	(a) the giving by it of a Part 4A permission to an investment firm, where the regulated activities to which the permission relates are investment services and activities,
	(b) the giving by it of a Part 4A permission to a management company (as defined in section 237(2)), where the regulated activities to which the permission relates fall within paragraph 8 of Schedule 2,
	(c) the cancellation by it of a Part 4A permission of a description falling within paragraph (b), or
	(d) the cancellation by it of a Part 4A permission under section 55J(6), in reliance on any one or more of the conditions in section 55K(1)(b) to (d).
	55Z2 Notification of EBA
	(1) A regulator must notify EBA of-
	(a) the giving by it of a Part 4A permission to a credit institution, where the regulated activity to which the permission relates falls within paragraph 4 of Schedule 2,
	(b) the cancellation by it of a Part 4A permission of a description falling within paragraph (a).
	(2) "Credit institution" has the meaning given in section 1H(8)."
	Amendment 153 agreed.
	Clause 9 agreed.
	Clause 10 : Passporting: exercise of EEA rights and Treaty rights
	Amendment 153A
	 Moved by Lord Davies of Oldham
	153A: Clause 10, page 59, line 18, at end insert-
	"( ) In seeking to ensure an appropriate degree of protection for consumers, the PRA and FCA shall-
	(a) require banks to provide clear and prominent warnings to consumers where deposits are not covered by the Financial Services Compensation Scheme; and
	(b) make and maintain effective arrangements to consult consumers on the prominence and method of such warnings."

Lord Davies of Oldham: My Lords, Amendment 153A relates to that part of the Bill which refers to passporting, where a UK-authorised firm may be eligible to carry out its permitted activities in any other EEA member state, subject, of course, to its fulfilment of the requirements under the scope of the relevant single market directive. We are concerned about consumer protection for firms operating in other EEA states which originate in this country. The amendment, which is quite clear and self-explanatory, requires either the FCA or the PRA to require banks to provide clear and prominent warnings to customers where deposits will not be covered by the Financial Services Compensation Scheme. Everyone will know the anxieties that have occurred as a result of the proliferation of a vast range of banking activities. This is a question of the basic operation of the bank elsewhere, and we think that the Bill should contain a fundamental identification of the obligation of banks so that customers know exactly where they stand with regard to any resources they may have committed to the banks. I beg to move.

Lord Sassoon: My Lords, I completely agree about the importance of such warnings and clarity about what compensation schemes apply to particular bank accounts, which is precisely why it is already covered in the FSA's handbook. As the noble Lord, Lord Davies of Oldham, may not be aware, section "Comp 16" of the FSA handbook requires precisely what the noble Lord requires. Firms from the EEA passporting into the UK are required to inform customers that they are covered by their home state's scheme. Firms from outside the EEA are required to be separately authorised in the UK, so that they are covered by the FSCS. We completely agree on the importance of this and of raising consumer awareness of it. Again, lots of good stuff went on in many areas during the summer and this is another one. If the noble Lord and the Committee generally want to look at the press release, it was put out on 31 August and sets out details of the FSCS awareness campaign. The notes to editors in it make clear the different health warnings that have to be put down for UK branches of EEA banks and the precise form of words. I do not happen to bank with one of those banks; I bank with a British bank which now adds an extra page-it is not great for the environment, but the extra page sets out the details of the coverage of the FSCS and EEA banks are now required to do something similar.
	The noble Lord makes a very good point, but I believe that we should leave it to the FSCS and the regulators to do what they are already doing, rather than writing inflexible requirements into legislation. The advantage of the current approach, as I am sure he will acknowledge, is that the regulator and FSCS can adapt their approach over time, but it is a useful matter for us to have spent four minutes on and I hope that the noble Lord is able to withdraw his amendment.

Lord Marlesford: May I just make one very small point to my noble friend? I declare an interest straightaway as a modest customer of the national savings bank. Along with many other people, I suspect, I assumed that if one had money in the national savings bank there was no way in which one would not be paid, however much money one had in it, in the event of any sort of default. When it transpired a couple of years ago that the national savings bank had put most of its money into the Bank of Ireland, certain fears were raised. It then became clear that the rules on the limit of compensation applied to money deposited with the national savings bank, just as they did to anything else. There was an implicit guarantee by reputation, as it were, on money put in the national savings bank, and the noble Lord's point underlines the need for implicit guarantees to be cancelled by explicit denials of obligation.

Lord Desai: I add to what the noble Lord, Lord Marlesford, has said. As a depositor in the US, I had a cheque book and it said on each cheque that I wrote to what extent my deposits were guaranteed by the FDIC. It is all right for the FSA handbook to say something, but it would be much better if on my debit card or cheque book-although people do not use cheque books any more-it said to what extent my deposit was guaranteed. If it said that, it would be very good.

Lord Sassoon: I thought that I had said this, but I shall say it again. The detail of what is covered is a requirement that comes with your bank statement, which is a more appropriate place. It is better to have it attached to the bank statement than on a cheque when you are paying money out. So it is there, and it is completely clear in the rules in the FSA handbook.

Lord Desai: I do not carry my bank statement with me, but I do carry my debit card.

Lord Davies of Oldham: My Lords, I am grateful for the additional contributions from the noble Lord, Lord Marlesford, and my noble friend Lord Desai, who at least emphasised the justification for our concern that we should make this issue as explicit as possible. My amendment would put it in the Bill. I accept what the Minister says on the enhanced flexibility of it being within the framework of the relevant regulators, but at times we need to assure the country that we are addressing ourselves to the very real anxieties that people have in the context of developments in recent years, particularly when considering this Bill. I accept the Minister's remarks. He may be somewhat relieved that my batting average dropped below 100 as soon as I lost the first amendment this afternoon. It was some relief to me; even Don Bradman, after all, had an average of only 99.94, so I do not mind if it declines a little further, given the assurances that the Minister has given to the House.
	Amendment 153A withdrawn.
	Clause 10 agreed.
	Schedule 4 : EEA passport rights and treaty rights
	Amendments 154 to 164
	 Moved by Lord Sassoon
	154: Schedule 4, page 198, line 39, leave out sub-paragraph (2) and insert-
	"(2) For "the Authority" or "the Authority's", in each place, substitute "the appropriate regulator" or "the appropriate regulator's"."
	155: Schedule 4, page 199, line 1, leave out "(7)" and insert "(8)"
	156: Schedule 4, page 199, line 2, leave out "(8)" and insert "(9)"
	157: Schedule 4, page 199, line 10, leave out "(9)" and insert "(10)"
	158: Schedule 4, page 199, line 13, at end insert-
	"( ) In the heading, for "Authority" substitute "appropriate regulator"."
	159: Schedule 4, page 199, line 32, leave out sub-paragraph (2) and insert-
	"(2) For "the Authority" or "the Authority's", in each place, substitute "the appropriate regulator" or "the appropriate regulator's"."
	160: Schedule 4, page 199, line 34, leave out "(11)" and insert "(11A)"
	161: Schedule 4, page 199, line 35, leave out "(11A)" and insert "(11AB)"
	162: Schedule 4, page 200, line 39, leave out sub-paragraph (4) and insert-
	"(4) In subsections (3) to (11), for "the Authority" substitute "the regulator"."
	163: Schedule 4, page 201, line 1, leave out "(10)" and insert "(11)"
	164: Schedule 4, page 201, line 2, leave out "(11)" and insert "(12)"
	Amendments 154 to 164 agreed.
	Schedule 4, as amended, agreed.
	Clause 11 : Prohibition orders
	Amendments 165 and 165ZA not moved.
	Clause 11 agreed.
	Clause 12 : Approval for particular arrangements
	Amendment 165A
	 Moved by Lord Flight
	165A: Clause 12, page 61, line 13, leave out from beginning to end of line 8 on page 62 and insert-
	"(3) The PRA and FCA must, in relation to dual-authorised persons-
	(a) specify in rules those functions carried on by authorised persons which are significant-influence functions;
	(b) set up and maintain joint arrangements to exercise their power under section 59(3)(a) to approve holders of any significant-influence function.
	(4) The FCA must, in relation to FCA-authorised persons-
	(a) specify in rules those functions carried on by authorised persons which are significant-influence functions;
	(b) set up and maintain arrangements to exercise its power under section 59(4)(a) to approve holders of any significant-influence function.""

Lord Flight: My Lords, I think it is self-evident that in gaining the advantage of twin peaks and what I hope will be a much better regulation of the safety of banks comes the cost of the requirement for elements of dual regulation and involvement. Rather contrary to what I had to say earlier about the authorisation of banks, when it comes to the authorisation and approvals of holders of controlled functions my amendment proposes, in essence, joint responsibility on behalf of the PRA and the FCA to approve holders of significant-influence functions for dual-regulated firms. Generally the industry has concerns that the proposed process for approving holders of controlled functions covered in Clause 12, which amends Section 59 of FiSMA, appears unnecessarily complex and might not have been fully thought through. From the drafting, it is unclear which regulator will be responsible for designating and approving some functions. The only straightforward, common-sense approach would be a joint responsibility on the part of the PRA and the FCA for granting approvals. Whatever system is put in place, it is important that it is run jointly in order to be as efficient as possible.
	The draft MoU between the PRA and the FCA gives further details of the proposed system, but this makes it clear that there is an assumption that certain roles-for example, the CEO and the chairman-are inherently prudentially focused and so should be approved by the PRA, although with FCA consent. The holders of these senior roles are as much responsible for ensuring that the firm meets conduct standards as prudential standards; in the case of many businesses, the conduct standards may be more fundamental than the prudential standards.
	I would like to hear the Minister's comments on this territory, but one approach that might make life simpler is to have joint responsibility for the more senior dual-registered holders.

Viscount Trenchard: My Lords, I support my noble friend Lord Flight in his amendment, principally because it reads much better and is much easier to understand than the equivalent part of the Bill, which is confusing to say the least. I further agree that there is a very considerable risk that approved firms, having to apply to two regulators separately, is going to reduce the attractiveness of London and lead foreign firms to consider establishing in other centres businesses that could be established in London. There is already a perception that it is extremely cumbersome to obtain approval for significant-influence persons and that it is more difficult to do that here than in other financial centres around the world, so I definitely believe that my noble friend's amendment would represent a significant improvement.
	It is also important to ask my noble friend the Minister whether, if joint responsibilities are to be agreed between the PRA and the FCA, that would mean a single procedure. If the two regulators are made jointly responsible but operate slightly different procedures that with time become more different, it makes it much more time-consuming and expensive for regulated firms to comply with the requirements.
	Has my noble friend also thought about customer-dealing functions? His amendments deal perfectly with the significant-influence functions, but the Bill as drafted also deals with customer-dealing functions, and I see no reason why these should not also be dealt with in an extremely simple and understandable manner using a form of words similar to his.
	Where joint responsibilities between the two regulators are agreed, will this lead to the avoidance or elimination of the duplication of staff between them? If you have two regulators doing the same thing, you have double the people and you may have even more people who are responsible for talking to their equivalents at the other regulator. Where joint responsibilities under the memorandum of understanding or elsewhere are agreed and put into force, can that be done in a way that reduces rather than increases the number of persons necessary to carry out the process?

Lord Sassoon: My Lords, I can assure my noble friends that these matters have been carefully thought about. To some extent, the somewhat tortuous drafting is entirely to achieve a simpler and more cost-effective result, even if the drafting of the Bill is more complex than my noble friend has suggested, although I do not think he is doing it to make the drafting more comprehensible.
	As with our earlier discussion about the authorisation of firms, we need to recognise that there are already difficulties in this area. My noble friend Lord Trenchard quite rightly points out how aspects of the authorisation processes in London are of concern to firms, particularly from outside Europe. I understand that. As he and I have discussed over a long period, different aspects of this go over many years. Whether it is the FCA or the new regulators, there is an ongoing challenge to make sure that the system is sensitive, appropriate and efficient, quite regardless of the new architecture. He makes an important point, but I suggest that it is a different point from the narrow but equally important one here about where best to do it in a dual-regulation, dual-supervision environment.
	Amendment 165A would establish a different system for designating significant-influence functions, or SIFs. For dual-regulated firms, the PRA and the FCA would jointly make rules specifying which functions are SIFs and then put in place joint arrangements for approving individuals to perform them. For FCA-only firms, this would be done by the FCA alone. I can see the attraction of the approach which my noble friend Lord Flight is proposing. The language and the on-the-face-of-it approach perhaps appear simpler than the arrangements in the Bill at present. However, the arrangements in the Bill have been thought about, and we believe that they are preferable because they put one regulator in charge of leading the process for approving those who wish to carry out roles involving significant influence over the conduct of affairs of an authorised person. In most cases, this will be the relevant prudential regulator, although the FCA will be able to designate SIFs in dual-regulated firms where the PRA has not done so. For example, the FCA will have a greater interest than the PRA in the chief anti-money laundering officer, so it may wish to designate this function in the absence of the PRA.
	We certainly do not think that the administrative process should be excessively difficult or lead to log-jams. The Government expect the two authorities to run a single administrative process for SIF applications, taking into account the statutory timeline. Indeed, the draft memorandum of understanding, published by the Bank and the FSA, makes clear that that is exactly what they will do: run one administrative process. I cannot answer my noble friend's question about whether there will be more or fewer people. All I can say is that they have already documented a process to make it as efficient as possible.
	With the explanation that this has all been very carefully thought out and that, although there is no perfect way to do it, we believe that the basis in the Bill as drafted will work better in practice for firms and for the regulators, I hope that my noble friend will withdraw his amendment.

Lord Flight: My Lords, I appreciate that this is a tricky issue to solve to the optimum, whichever route you choose to go down. I would just comment that, particularly as the drafting of the legislation is less than clear, I hope the Minister might give an undertaking that the two new regulatory bodies would issue codified statements for people wanting to seek approval as to where they should go as a first port of call, depending on their functions. This would make life easier, particularly for non-UK parties. With that proviso, I beg leave to withdraw the amendment.
	Amendment 165A withdrawn.
	Clause 12 agreed.
	Clause 13 agreed.
	Schedule 5 agreed.
	Clause 14 : FCA to exercise functions under Part 6 of FSMA 2000
	Amendment 165B
	 Moved by Lord Flight
	165B: Clause 14, page 63, leave out lines 34 and 35 and insert-
	"( ) In section 72-"

Lord Flight: My Lords, this group of amendments is concerned really with the same issue: the designation of the competent authority in the Bill. When FiSMA was introduced, it was straightforward to transfer authority to the LSE as the definition was of competent authority. The Bill as redrafted clearly makes the definition the FCA itself. These amendments seek to revert to the previous arrangement as an insurance policy against a potential, albeit unlikely, wish to change the listing authority in the future, so they are designed to retain all existing references to the competent authority in the FiSMA, to change the designation of competent authority to the FCA and all existing references to the authority to the FCA, to retain existing provisions relating to the duties and powers of the competent authority and to retain the existing ability to transfer the designation of competent authority to another person.
	I am aware that the Treasury's position has been to want to put beyond all doubt the fact that the FCA would remain as the listing authority, and I understand that point. There had been some discussions about merging the listing function with the Financial Reporting Council, although the consensus of consultation was against it. There is a practical argument in favour of leaving things defined the way they are, to enable changes to be made in the future without having to revert to primary legislation.

Lord Sassoon: I am not the first noble Lord to have jumped up a bit fast this afternoon but will probably not be the last-apologies for that.
	On the amendment, we need to go back over a little of the history, which is all to do with the question of who was going to be the listing authority at the time FiSMA came in. My noble friend Lord Flight refers to the past couple of years, but as I understand it-and I remember a little of this-it was unclear at the time FiSMA was enacted whether the FSA would undertake the listing functions on a permanent basis. As a result, Part 6 of FiSMA was prepared as a self-contained part of the Act and included some provisions-for example, those relating to fees and penalties-that are included elsewhere in FiSMA to apply to the FSA in its general capacity.
	I suggest, on the point about the listing authority having a special status and being more flexible in order to be moved around in the future, that that would not have been considered at all if it had not related to the circumstances a decade or so ago. Since then, not only was the listing authority with the FSA through that period but, as my noble friend said, the Government considered the question, at a very early stage of the work leading up to this Bill, of the appropriate future home of the listing function. As my noble friend recognises, as a result of that consultation in July 2010, which was essentially about whether the listing function could be merged with the Financial Reporting Council, the clear view among the vast majority of respondents was that listing should be with the FCA, along with other parts of market regulation. FiSMA also includes provision for the possible transfer of the competent authority functions to another organisation.
	Clause 14 gives effect to that decision. I say again to my noble friend that if it had not been for the particular circumstances of uncertainty going back a decade and more, there would not have been this anomaly. We are now tidying it up and making the listing function a core part of the FCA, as with all other major parts of its activity. I hope that, on the basis of that explanation, my noble friend will withdraw his amendment.

Lord Flight: My amendment was there to raise the matter for discussion and I am satisfied with the Minister's response. I beg leave to withdraw the amendment.
	Amendment 165B withdrawn.
	Amendments 165C and 165D not moved.
	Amendment 165DA
	 Moved by Lord Stevenson of Balmacara
	165DA: Clause 14, page 64, line 8, at end insert-
	"(3A) In section 73(1), at the end insert-
	"(g) to foster ethical corporate behaviour, including respect for internationally-recognised human rights"."

Lord Stevenson of Balmacara: My Lords, the purpose of this group of amendments is to demonstrate that government recognises that business has a responsibility to respect human rights and sustainable development, to focus corporate behaviour on its wider social and environmental impact, to provide information to affected individuals and communities, and to inform better the investor community.
	The Government have said that in discharging its general functions the FCA must act in a way that is compatible with its strategic objective-ensuring that relevant markets function well-and in a way that advances one or more of its operational objectives. I argue that these amendments would be entirely compatible with both the FCA's strategic and operational objectives, as it would uphold the integrity of the Stock Exchange and ensure that businesses take into consideration the full impact of their operations. This approach is supported by a wide range of organisations, including Aviva Investors, the Carbon Disclosure Project, Save the Children, the Co-operative and the World Wildlife Fund.
	There is of course a legal case for this. In June last year, along with every other member of the UN Human Rights Council, the UK endorsed the UN framework on human rights and transnational corporations, which enshrines the state duty to protect alongside the corporate responsibility to respect human rights. The Government, including the Prime Minister, have been enthusiastic in their support for these principles, but so far they have not spelt out how they intend to fulfil them. Listing requirements specifically relating to human rights and sustainable development would be a strong first step. The UK has a duty to protect human rights under international conventions to which it is a signatory. The human rights obligations of states under international law include the taking of effective measures to prevent human rights abuses by third parties, including companies.
	The Combined Code on Corporate Governance,issued by the Financial Reporting Council, gives guidance to companies on reporting CSR-related matters. The listing rules of the London Stock Exchange require companies incorporated in the UK and listed on the main market of the exchange to report on how they have applied the combined code in their annual report and accounts. Overseas companies listed on the main market are required to disclose the significant ways in which their corporate governance practices differ from those set out in the code. The reporting obligations in the Companies Act 2006 extend to everything of relevance to the company within the terms of Section 417 of the Act. There are no geographical restrictions on what information is relevant or may be disclosed. Markets are driven by information. If the information they receive is short term and thin, these characteristics will define our markets. These amendments would serve to improve the information available to investors and all external stakeholders.
	A recent survey of global stock exchanges conducted by Aviva Investors revealed that 57% of respondents agreed that strong sustainability requirements for listed companies made good business sense for the exchange. Only 14% of respondents disagreed. A lack of regulatory support was highlighted by over half the respondents as a factor that discouraged them from undertaking sustainability initiatives.
	Stock exchanges play a vital role in economic development as one of the primary tools for the allocation of capital in both emerging economies and developed ones. Yet at present there is no requirement on applicants to the London Stock Exchange to provide information on their social or environmental impact, which means there are no sanctions available to the UK Listing Authority, even if a company listed on its main market is found guilty of the most grievous human rights abuses.
	London is already behind the curve in this area and we suffer reputational risk if we do not act. For instance, the Hong Kong stock exchange mandates that mineral companies must: divulge the likely,
	"impact on sustainability of mineral and/or exploration projects";
	reveal the,
	"claims that may exist over the land on which exploration or mining activity is being carried out, including ancestral or native claims";
	and state the company's,
	"historical experience of dealing with concerns of local governments and communities on the sites of its mines"
	and,
	"exploration properties".
	The Shanghai stock exchange requires listed companies to commit to environmental protection and community development while pursuing economic goals and protecting shareholders' interests. In Luxembourg, listed companies must have "high standards of integrity", and behave in a "responsible manner". In Malaysia, listing rules include provisions on CSR reporting, and the stock exchange has also developed a CSR framework with accompanying guidance for directors. Human rights are also referenced throughout guidance materials elaborating on the framework, most recently in a training tool for directors.
	The business case for human rights and sustainable development reporting is therefore robust. The current listing requirements are in place to allow investors to make good and informed decisions about the merits of investing. Arguably, this would be impossible without information on the social and environmental impact and responsibility of a company. The UK's largest institutional investor, Aviva Investors, has called for a,
	"listing environment that requires companies to consider how responsible and sustainable their business model is, and also encourages them to put a forward looking sustainability strategy to the vote at their AGM".
	It is widely accepted that environmental and social governance performance can have a significant impact on shareholder value and should therefore be taken into full consideration by companies in their reporting and financial disclosure.
	When a similar amendment to the Bill was raised in the other place, the then Minister said that the proposers,
	"have raised some very important issues and there is a lot of truth in what they say. The reputation of the UK listing regime depends partly on the behaviour of companies, and we need to think about that quite carefully".
	He also said:
	"Matters of stewardship and corporate behaviour are predominantly the responsibility of the Financial Reporting Council, which is responsible for the stewardship code and corporate governance issues".-[Official Report, Commons, 22/5/12; col. 1028.]
	However, as the FRC recently explained to the Treasury Select Committee, its role is about implementation and not about applying sanctions.
	A gap is developing between what we would all agree is best practice and what needs to be done to ensure that the rules are followed; effective sanctions must be available. There is currently no single body responsible for all aspects of company behaviour, including the raising of finance. Under the current regime, the listing process provides the funds that companies need to invest and grow, and shareholders have the primary responsibility for holding business to account for its behaviour. However, there is no regulatory body responsible for both sides of that equation with sufficient powers to intervene. I believe that the FCA should take the lead as it has the authority, the expertise, the personnel and the funding to enable it to exercise vigilance over all UK listed companies. I beg to move.

Lord Sassoon: My Lords, Amendment 165DA would require the FCA to have regard to fostering ethical corporate behaviour when exercising its listing functions. While we would all agree on the importance of corporate ethics, the issue here is whether we should make changes to the Bill to give the FCA specific roles or responsibilities in relation to them. The Government consider that the answer to that question is no.
	The objective of our reforms is to put in place a new regulatory system with properly focused regulators who have clear responsibilities and objectives. This, of course, replaces a regulatory system which was not sufficiently focused and failed when the point came to protect consumers adequately. However important additional, worthy objectives might be, we need to be mindful at all times of the need for focus on the new bodies which we are creating. In this particular case, there are of course already other bodies or agencies engaged in these important matters. In particular, as the noble Lord, Lord Stevenson of Balmacara, knows, the Financial Reporting Council is responsible for the corporate governance code and the stewardship code to which he referred. That is where I believe we should leave this responsibility, rather than blurring or muddling the lines.
	Amendment 167E is more specific. It would require the FCA to make listing rules to require all listed energy and mining companies to carry out human rights due diligence and then require the companies concerned to make annual human rights impact reports to the exchange. Again, I can appreciate what is behind Amendment 167E but do not believe that it is necessary.
	First, the FSA currently-and the FCA in future-is already able to make listing rules covering both points made by the amendment if it considers it appropriate to do so. I see that the noble Lord is nodding. We do not need to give new powers in this respect to the FCA, or to include new requirements in FSMA. However, I know that the noble Lord will come back and say it is one thing that they have the ability to do it, and another thing if we think it to be sufficiently important. I understand that, but they do have that ability.
	Secondly, we see the way forward to be encouraging transparency and supporting action in the countries in which mining and other extractive activity takes place. That is why the Government support the EU proposals to improve transparency in the extractive-oil, gas and mining-and forestry sectors. We are already engaged in the EU negotiations on this issue. The Government also support the extractive industries transparency initiative and encourage resource-rich countries to sign up to it. Under that initiative, companies publish the payments they make to Governments of resource-rich countries, and these Governments publish the payments they receive from extractives so that the benefits from extractives can be seen by all. Therefore, while I appreciate that the noble Lord wishes to go harder on this, I believe that the Government are being active on the case. These are important issues and it is better to leave it to the FRC through the code on the one hand, and to push forward with these important international initiatives on the other. On that basis, I ask the noble Lord to withdraw his amendment.

Lord Stevenson of Balmacara: My Lords, I thank the Minister for his comments. I understand where he is coming from and indeed he answered for me in some senses by explaining what he thought I might say in response, so I will not add to that. At the heart of this there are just two points. It is true that the bodies he mentioned have responsibilities. However, because there is no single body with the clear authority to act, it is a bit of a muddle and it is something that in future we may have to come back to. As the Minister said himself, the current FSA has, and the future FCA will have, the powers to set down rules, but the fact that the FSA has not done so is obviously relevant. I was grateful to the Minister for his comments about the EU initiatives in this area. These are important, and certainly the transparency that he has sought is at the heart of what I have been saying. That said, I beg leave to withdraw my amendment.
	Amendment 165DA withdrawn.
	Amendment 165E not moved.
	Amendments 166 and 167
	 Moved by Lord Sassoon
	166: Clause 14, page 64, line 25, leave out from "State)" to end of line 26 and insert-
	"(a) in subsection (1), for "competent authority", in the second and third places, substitute "FCA", and
	(b) in subsection (3A), for "competent authority" substitute "FCA"."
	167: Clause 14, page 64, line 32, after ""other"" insert-
	"( ) in subsection (1A), for "competent authority", in the first place, substitute "FCA"."
	Amendments 166 and 167 agreed.
	Amendments 167A to 167D not moved.
	Clause 14, as amended, agreed.
	Amendment 167E not moved.
	Clause 15 agreed.
	Clause 16 : Listing rules: disciplinary powers in relation to sponsors
	Amendments 168 to 170ZA not moved.
	Clause 16 agreed.
	Clause 17 : Primary information providers
	Amendments 170A to 173 not moved.
	Clause 17 agreed.
	Clauses 18 to 20 agreed.
	Schedule 6 agreed.
	Clause 21 : Proceedings before Tribunal
	Amendment 173ZA
	 Moved by Lord Flight
	173ZA: Clause 21, page 77, line 36, leave out paragraphs (a) to (c)

Lord Flight: My Lords, it is widely known that there are some concerns within the industry that in a more interventionist and judgment-based regulatory environment, the ability to challenge the regulators' decisions should be strengthened rather than weakened. My amendments in this group essentially seek to retain the current provisions. I am obviously aware that the Government's Amendments 184 and 185 go a long way to alleviate the underlying concerns here. Under them, the regulator will be obliged to issue another decision notice, not a final notice, when the tribunal gives a direction to the regulator to reconsider a non-disciplinary case.
	However, if I have understood it correctly, the Government's amendments enable the tribunal to substitute its opinion only in disciplinary cases and not in judgment-led decisions. I am not clear why judgment-led decisions should not be included, because they are the most sensitive and perhaps the most appropriate for further consideration. I look forward to hearing the Government's case for tabling amendments on this issue. I beg to move.

Lord Sassoon: My Lords, I am happy to speak next. In doing so, I will first need to go through the analysis of my noble friend's amendments and the effect of the Government's amendments in the group. I invite the noble Baroness to break in at any stage if it would help her.
	The starting point is that the experience of the last few years has shown that we do not want a regulator with broad responsibilities that is too much focused on narrowly policing compliance with rules. We are still dealing with the consequences of that approach. The reforms, in particular those in this clause, are about giving the new regulators the right focus and mandate. They are also about judgment, and empowering the regulators to use their knowledge, experience and expertise to take difficult decisions, often on a proactive and preventive basis. The changes to the arrangements for appealing firm-specific decisions set out in Clause 21 play a key role in making this happen.
	I will be clear about what our changes will mean. Clause 21 carries forward the rights of those who are dissatisfied with a firm-specific decision of the FCA or PRA to refer the matter to the tribunal, and preserves the ability of the tribunal to reconsider the matter afresh on a full-merits basis. There have been no changes to the grounds on which the tribunal will consider references. It will continue to consider references on a full-merits basis. In addition, for disciplinary matters or references under Section 393 of FSMA that relate to third-party rights, the ability of the tribunal to substitute its opinion for that of the regulator remains unchanged.
	What has changed is the nature of the directions that the tribunal will be able to give in the case of references that do not fall into the above category. In these cases, where the tribunal decides not to uphold a decision, it will not be able to substitute its decision for that of the regulator. Instead, it will be required to remit the decision back to the regulator, giving directions that it considers appropriate. The directions will be limited to findings relating to matters of fact or law that should or should not be considered by the regulator, and whether or not there were any procedural deficiencies. This is an important part of the move to judgment-led regulation, which recognises that it is the regulator's job to take regulatory decisions, while providing a mechanism for judicial scrutiny of the fairness of those decisions.
	I have already set out why the Government attach significant importance to the new arrangements for appealing non-disciplinary decisions. However, we must also ensure that we provide a fair regime for firms, and give certainty and clarity around procedures. That is what government Amendments 184 and 185 seek to do. Where a non-disciplinary reference is made, the tribunal remits the matter to the regulator. The regulator must then reconsider the matter in accordance with the tribunal's directions. These amendments seek to provide clarity about what happens next. They require the regulator to issue a second decision notice rather than moving straight to a final notice, as would be the case under the Bill as drafted. Once a final notice has been issued, the firm's or individual's options for further challenge are strictly limited. A final notice can be appealed to the High Court only by way of a judicial review, on more limited grounds and at the risk of higher costs and lengthier delay.
	Amendments 184 and 185 would require the relevant regulator to issue a second decision notice in all such cases once it has considered the tribunal's direction and reached a new decision in accordance with the tribunal's findings. This means that the firm or individual could challenge the second notice, for example if they do not think that the regulator has properly considered the tribunal's direction in reaching its new decisions. There will be a second hearing before the tribunal, which will be able to consider the full merits of the matter and deal with the case more speedily and, because it will already be familiar with the case, at lesser cost to the firm and the regulator.
	The amendments will increase fairness for firms and substantially strengthen the new arrangements. I hope that I have done enough to convince my noble friend. I think he already recognises that the government amendments go a considerable way toward allaying his concerns. Having heard the further explanation of how the process is intended to operate, I hope that he will feel able to withdraw his amendment.

Lord Flight: My Lords, I thank the Minister for his explanation of a rather complicated territory. Certainly I think it is as much as we are likely to get here. There is still a slight question in my mind about whether tribunals should be able to overrule judgment-led decisions. However, it seems that a reasonably fair system has been set out for members of the industry. I beg leave to withdraw the amendment.
	Amendment 173ZA withdrawn.
	Clause 21 agreed.
	Clause 22 : Rules and guidance
	Amendment 173A not moved.
	Amendment 173ZAA
	 Moved by Lord Sassoon
	173ZAA: Clause 22, page 78, line 37, after "directives" insert "or the emission allowance auctioning regulation"
	Amendment 173ZAA agreed.
	Amendment 173ZAB
	 Moved by Lord Sharkey
	173ZAB: Clause 22, page 79, leave out lines 1 to 29 and insert-
	"137B FCA general rules: clients' money, right to rescind etc.
	(1) Rules relating to the handling of money received or held by an authorised person in specified circumstances ("clients' money") may-
	(a) make provision which results in that clients' money being held on trust in accordance with the rules;
	(b) treat two or more accounts as a single account for specified purposes (which may include the distribution of money held in the accounts);
	(c) authorise the retention by the authorised person of interest accruing on the clients' money; and
	(d) make provision as to the distribution of such interest which is not to be retained by the authorised person.
	(2) An institution with which an account is kept in pursuance of rules relating to the handling of clients' money does not incur any liability as constructive trustee if money is wrongfully paid from the account, unless the institution permits the payment-
	(a) with knowledge that it is wrongful; or
	(b) having deliberately failed to make enquiries in circumstances in which a reasonable and honest person would have done so.
	(3) In the application of subsection (1) to Scotland, the reference to money being held on trust is to be read as a reference to its being held as agent for the person who is entitled to call for it to be paid over to him or to be paid on his direction or to have it otherwise credited to him.
	(4) Rules may-
	(a) confer rights on persons to rescind agreements with, or withdraw offers to, authorised persons within a specified period; and
	(b) make provision, in respect of authorised persons and persons exercising those rights, for the restitution of property and the making or recovery of payments where those rights are exercised.
	(5) "Rules" means general rules of the FCA.
	(6) "Specified" means specified in the rules."

Lord Sharkey: My Lords, Section 55 of the Financial Services Act 1986 provided that the regulator may make regulations with respect to money that authorised persons of any descriptionhold in such circumstances as are specified in the regulations. This was augmented by the EU investment services directive which in 1996 required the UK to,
	"make adequate arrangements especially in the event of the investment firm's insolvency",
	and most recently by the European Market Infrastructure Regulation as well. The power of the regulator to make rules under Section 139 of FiSMA has been hotly debated and contested in the courts. Many hundreds of thousands-probably millions-of pounds have been expended in legal and administrators' fees in determining the scope and application of the rules when an authorised firm becomes insolvent.
	In addition to that of Lehman Brothers International (Europe), the credit crunch resulted in a number of failures where client money rules continued to be at the centre of identifying and returning to clients' money held for them by an authorised firm, bank, clearing house or intermediate broker to whom the money had been paid on behalf of the clients. One important and complicating factor in trying to resolve the proper and speedy return of cash lies in the arguably different status of cash held and cash received. The Supreme Court has ruled that the protection of clients' money extends to money received by the firm and not just money held in client money bank accounts. We are therefore proposing in Amendment 173ZAB that the power to make rules includes the power to make rules relating to the handling of money received by the firm as well as that held by the firm.
	In addition, the Bill appears to delete specific provision in relation to the application of these rules in Scotland. I ask the Minister to confirm that, in proposing the deletion of Section 139(3) of FiSMA, relating to the position of the statutory trust in Scotland, they have taken appropriate Scots law advice and in particular to confirm that the proposed change would not give those contracting under Scots law-for example, under most agreements with the Royal Bank of Scotland-a different outcome in relation to the receiving and holding of client money than would be obtained by those contracting under English law. I beg to move.

Baroness Kramer: My Lords, I will speak to Amendment 173AAZA in this group and I will be brief. Your Lordships will recognise that this amendment is part of the family of amendments that we on these Benches have moved. Amendment 173AAZA addresses the issue of social enterprise. It gives the FCA the power to make general rules for social enterprises to advance the consumer protection objective and the competition objective, and for services to small and medium-sized businesses, to defined groups within the more deprived economic and social environment and for environmental purposes.
	It is the contention on these Benches and through much of this House that the current organisations that provide financial services fail to meet the needs of important communities, especially small and micro-businesses and deprived communities, and very often they certainly do not provide the necessary financial services to environmentally-oriented projects. Part of the barrier to the entry of new organisations that could meet those financial needs is the approach of the regulator which is very much a one-size fits all approach. Throughout this Bill we have been calling for the regulator to have the power to deliver appropriate regulation. This amendment addresses those issues particularly around social enterprises and other organisations with a social objective.
	We recognise that the Government are somewhat sympathetic to the issues that we have raised. This is a probing amendment but also a reminder that although we went away for the summer we have not dropped, and will not be neglecting, these issues as this Bill proceeds to its end.

Lord Flight: My Lords, three different sets of amendments that I have tabled are grouped together here and they cover rather different territories. I will be as organised as I can in presenting them.
	Amendment 173AA is about fair process for product intervention powers. I understand, and have a deal of support for, the regulator being able to ban promptly products that are clearly undesirable. However, if additional product intervention powers are put in place, there ought to be legislative safeguards to ensure that the powers are used as a last resort and not regularly. Amendment 173AA seeks to put in place safeguards for the use of product intervention powers, such as those set out in the EU markets in financial instruments directive.
	Many noble Lords may have noted that Martin Wheatley, the designate head of the FSA, had made statements about shooting first and asking questions later and had perhaps over-made his point. One of the issues I want to speak about on Report regarding the new regulatory order is that I have encountered reluctance by the industry to raise criticisms with the regulator for fear of unpleasant reciprocal action. I fear we are slightly swinging from an era where regulation was very lax to one in which there may not be enough open debate between the regulator and the industry.
	My Amendments 173ACA to 173AE seek to remove the requirement to publish details of directions prior to the conclusion of the representation process. There is an analogous issue that will come up in due course with regard to warning notices. In a world where anything published is a label of guilt, I am inherently opposed to the publication of notices before there has been fair representation and a fair judicial process.
	My Amendment 173AF covers slightly different territory. The Bill already gives the FCA the right to introduce rules without consultation where it would be considered that a delay would be prejudicial to the interest of consumers. This additional power, which my amendment seeks to block, is unnecessary and provides the FCA with excessive powers without appropriate checks and balances.
	Amendment 173AG raises the issue that very little detail is included about what should be covered by the statement of policy. It would be better if the statement of policy were clear and transparent, particularly if there is no consultation on the specific use of the powers. Finally, the statement of policy should be used for production intervention powers generally.
	I cannot find the appropriate notes. Amendments 187RA and 173AAC both cover completely different territory. As noble Lords will be aware, financial advisers are the only category of people who do not have protection from the statute of limitations for a period beyond 15 years. In practice, this means that if there are any outstanding issues when a financial adviser retires, there is no closure. There are many such situations. Sometimes issues may be with the ombudsman or the regulator from way back and there is no indication whether any action will be taken. This is a messy situation and it is ultimately unfair to financial advisers, and not helpful to clients, as it stops financial advisers being able to hand on or sell their businesses to others in the industry. I can see no really fair justification why financial advisers should not enjoy the same protection as those in other industries. I may add something further after the Minister's response.

Baroness Hayter of Kentish Town: My Lords, I am sorry that we do not have the other amendments in order to be able to have a long discussion about "may" and "must", but such are the events of the evening.
	There are two major areas of concern for us in this set of amendments, and I am afraid that they are found in the amendments tabled by the noble Lord, Lord Flight. Unsurprisingly, one involves the so-called toxic products powers, and the other financial promotions. We have already congratulated the Government on their initiatives in this Bill on both of these issues, so it will come as no surprise that we would not support any weakening of their well chosen tools. Product intervention powers are absolutely key. They will allow the FCA to take prompt action to prohibit the sale of a particular product or to counter a product feature either on a temporary or permanent basis. There has been widespread mis-selling of endowment mortgages, PPI, interest-only mortgages and self certified mortgages; we all know the list. It demonstrates that the FSA failed to act swiftly enough to prevent widespread consumer detriment. It is highly unlikely, despite some of the lobbying that I know we have been receiving, that the retail distribution review would have had an effect on any of those, and nor indeed the TCF initiative. After all, treating customers fairly was always a part of FiSMA.
	Product intervention needs to be seen as more than just a decision on whether to ban a particular product. It can also be used to control the way banks vary the terms or other specifics. Many products are not in themselves toxic. Even PPI was a very good product for a certain group of people, as were interest-only mortgages. The issue arose over the way they were sold-their packaging and their terms. That is what made them toxic. We would not want to see any weakening of what the Government have already put in the Bill.
	With regard to the new and, I think, long overdue powers on financial promotion, these will allow the FCA to publish details about misleading adverts once they have forced their withdrawal. It seems extraordinary that that is not already the case. Surely if an advert is found to be misleading, every consumer who might have seen it or been influenced by it should know that it was not all that it sounded. Making public the findings on financial advertisements will also encourage other consumers to report anything that they think is a little suspicious. The power to publish will provide a real incentive for firms to improve standards and, I think, to be wary of allowing their marketing departments to push the boundaries. Research by Which? shows that many adverts for financial products have been in breach of consumer law. The organisation asked consumers about this, and two thirds responded saying that they want the financial regulator to be proactive in taking misleading financial adverts off the market. We know some of the numbers in this area. Which? asked the FSA how many adverts it had removed. In 2010 the authority removed 262 misleading adverts, and last year it removed 327, which is almost one for every working day. However, we do not know what the adverts were because no details are available to us as consumers. So the fact that in future the FCA will be able not just to take action but to publicise it is a power that we welcome. We would not want to see it diminished in any way.
	We are sympathetic to the quite different amendments spoken to by the noble Lord, Lord Sharkey, and the noble Baroness, Lady Kramer, and again we look forward to the Minister's response.

Lord Sassoon: My Lords, I shall start with Amendment 173ZAB. We are talking about new Section 137B which provides for FCA rules about the handling of clients' money and related matters. It will replace existing Section 139 of FiSMA which is entitled, somewhat enigmatically, "Miscellaneous ancillary matters", which does not really do it justice. However, as my noble friends have identified, it does not exactly reproduce Section 139. Their amendment would ensure that it tracks Section 139 in every respect by reinserting one subsection which, as my noble friend explained, relates to how references to money held on trust are to be construed in Scotland. Following consultation with the Scottish Law Commission, we reached the view that the relevant law in Scotland was sufficiently similar to the rest of the UK that it was neither necessary nor desirable to make different provision for Scotland in this way. I can reassure my noble friend that the recent Supreme Court judgment on Lehman Brothers also supports the view that a firm in Scotland which receives and holds a client's money is obliged to hold that money in a way which preserves it for the client's benefit as a trustee. This confirms that the approach taken in England, Wales and Northern Ireland is also correct for Scotland and that it is unnecessary to carry forward Section 139(3). I am happy to confirm that.
	I turn now to social enterprise rules and Amendment 173AAZA, which seeks to give the FCA a new power to make social enterprise rules. I was of course delighted that my noble friend reminded us that social enterprises have not gone away over the summer break. I could leave it at that but I should probably do slightly more justice to this, although what I say will be entirely consistent with where I was before the break. We discussed in some detail the role that the FCA should or should not play in relation to social investment and enterprise and I will not repeat the whole of that debate. For the purposes of this amendment, I simply wish to put on record that where those running a social enterprise are carrying out a regulated activity, they will need to be authorised and will therefore be regulated by the FCA and will be subject to the rules that the FCA makes.
	The drafting of the FCA's objectives as well as new Section 137R make clear that the FCA should distinguish between different types of authorised persons and their consumers. There is therefore no need for a bespoke power. Specific rule-making powers in Clause 22 exist only where such rules go beyond the general rule-making power-for example, because they extend to unauthorised persons or affect third party rights. I would suggest that that is plainly not the case here.
	On product intervention, I turn first to the group of amendments that seek to amend the FCA's new product intervention power. This new power provides the FCA with a clear mandate from Parliament and the right tools to support a new and more proactive approach to consumer protection with greater regulatory scrutiny of the products themselves. I am grateful to the noble Baroness for her recognition of and support for the importance of the new rules in this area.
	Amendment 173AA would restrict the circumstances in which the FCA may make product intervention rules. I should like to reassure my noble friend that to a large extent the Bill already requires the FCA to exercise the power in the way intended in the amendment. To be clear, however, there is one respect in which I do not sympathise with the amendment; namely, proposed new subsection (11)(a). This seeks to raise the threshold for intervention to where a product or practice,
	"gives rise to significant investor protection concerns or poses a serious threat",
	to market integrity or financial stability. The amendment would prevent the FCA intervening to advance its competition objective in relation, for example, to high exit fees which, I am sure my noble friend would agree, have a negative impact on switching. The Government believe that this is an important feature that we want to see in the marketplace. The power would therefore become an exclusively negative rather than a positive tool. That would represent a significant step back in terms of consumer protection and is why I cannot support my noble friend's amendment.
	Amendment 173AF deletes the option for the FCA to make temporary product intervention rules. It is correct that the FCA's rule-making power is very broad. The new power puts beyond doubt that the FCA has a mandate in this area. It also introduces a safeguard as temporary rules expire after 12 months plus breach of a ban can render a contract unenforceable. The default will be that any product intervention rules are made under the normal rule-making procedure, with prior cost-benefit analysis and public consultation. However, given the speed with which a new product can gain traction in the market, and the fact that the FCA cost-benefit analysis and consultation take a minimum of six months, we think it is important that, specifically for product intervention rules, the FCA has the option to intervene more swiftly albeit with the limitation that I have just outlined.
	I turn to Amendments 173AG and 173AH on the FCA's statements of policy under this power. The purpose of the statement of policy is to provide industry and consumers with clarity around the circumstances in which the FCA will make temporary product intervention rules in the absence of prior consultation. The FSA has published a draft of the statement on its website and noble Lords will see that it sets out the factors that the FCA will take into account before and the process it will go through. Linking the statement to the temporary rule-making power does not, of course, preclude the FCA from publishing information about its general approach to product intervention. Indeed, the FSA has already published a discussion paper and a policy statement on this topic.
	However, the link we have here is consistent with the wider approach taken in FiSMA and in the Bill that policy statements are required only where there is a very specific need to provide further guidance on how the regulator will exercise a power or function; for example, the power to impose penalties. Therefore, out of the very many policy statements that the FCA and the FSA have and will have, only 10 policy statements are required by FiSMA, as amended by the Bill, principally relating to enforcement and imposition of penalties. In this instance, the need for guidance does not extend to the general product intervention power as the process for making such rules is set out in the Bill itself so the statement is deliberately limited to the temporary power because of the very particular effect that a temporary power will have through the short cut to making it. Finally, while I can reassure my noble friend that I expect the FCA's statement of policy to cover the main points in Amendment 173AH, I do not believe it appropriate to specify this much detail in the Bill.
	I turn to the group of amendments that start with Amendment 173AAC relating to the issue of a long-stop requirement for complaints about financial services. When the FSA last looked at the issue in 2007, it said that to introduce a time bar, it would need to be clear that the potential detriment to consumers was outweighed by the benefits to consumers and firms arising from greater certainly among independent financial advisers about the extent of their liabilities. It is this cost benefit analysis that needs to be addressed. The FSA said in its published response of 5 November 2011 to the Treasury Committee's retail distribution review report that,
	"the FSA believes the FCA should review this issue again at some point in the future".
	I certainly believe it is important that the expert regulator looks at this issue and undertakes the necessary consultation with consumers and firms. I am grateful to my noble friend for this amendment because it has prompted me to look back at the rather unspecific commitment that the FSA gave to the Treasury Committee. As a consequence of my noble friend's prompting, I followed up on the point with the FSA and it has made a commitment that the FCA will consider whether to investigate the case for a long stop as part of its business planning for 2014-15. The timing of that is linked to the settling down of the RDR. Therefore, I am grateful to him for prompting this and I would encourage industry and consumer groups to continue a dialogue with the FSA on this topic.
	I turn to the Amendments starting with 173ACA on the new power to make rules concerning financial promotions. I cannot agree with Amendments 173AC and 173ACA. Financial promotions can have an immediate detrimental impact if consumers act on them. Quick and decisive action is therefore needed on the part of the regulator and we must empower the regulator to use its judgment to make a call on a promotion. It may be too late once the promotion has been made or while the regulator undertakes further investigation. This is why the power applies both where it is clear that rules have been breached, and where in the view of the regulator this is likely to be the case, and enables the regulator to prevent a promotion from being made. To provide the most obvious example of why "likely to" is required, the FCA needs to be able to require a firm not to circulate a promotion where it becomes aware of a promotion before it is actually circulated and the FCA is of the view that it is likely to breach financial promotion rules if circulated.
	Finally, I turn to Amendments 173AD and 173AE, which seek to change the disclosure obligations attached to this power. Amendment 173AD seeks to change the duty on the FCA to publish information about a direction it has given to a power to do so. Amendment 173AE seeks to block the FCA from publishing information where a direction has been revoked. The fundamental shortcoming of the current financial promotions regime is that in most cases the FSA is not able to publish the fact that it has asked a firm to withdraw a misleading promotion. The power-which I am grateful to the noble Baroness for giving her support to-is designed to address the deficiency by giving the FCA a broad requirement, including a requirement to publish such information about the matter as it considers appropriate.
	The Government believe it is important that the FCA should disclose what it has found for a number of reasons: it will help consumers, as they will be able to see what the regulator did and why; and, importantly, it will also increase the accountability of the regulator, as it will have to outline its thinking and set out where it has or has not taken action. The importance of the regulator both taking effective action and being seen to be taking effective action in this area is vital.
	However, I accept that there may be circumstances when it is not necessary or appropriate to publish the information about a direction. Therefore we will look again at subsection (11) and consider carefully whether we should change the provisions relating to disclosure from a duty to a power. We will return to this issue on Report. On the basis of those reassurances and explanations I hope that my noble friend Lord Sharkey will feel able to withdraw his amendment.

Lord Sharkey: I am grateful to the Minister for confirming the Scottish situation. However, I am not entirely sure whether I am correct in understanding him to say that there is now no need to add explicitly cash received to cash held in Amendment 137B. On the assumption that that is the case-I can see that he is nodding to say that it is-I am happy to withdraw the amendment.

Lord Flight: My Lords, I congratulate the Minister on embracing such a broad range of issues, which have been grouped together here. I would like to add only the following. I am pleased to hear what he had to say about the publication of directions relating to promotions, which was really the main point of my amendment. Regarding the issue of the Limitation Act and the 15-year long stop, I am also very pleased to hear that the Minister is focusing on this. As things stand, RDR is likely to result in many thousands of financial advisers ceasing to be in business, with other major problems that can be dealt with at another time in another place. It will be a much bigger issue than it is at present in terms of all these people who are, if you like, retiring and going out of business, and it seems fundamentally equitable that the general law of limitations should apply to all transactions without any special treatment for financial services claims or ombudsmen's complaints. I wonder whether the judiciary should be advising about this, at least as well as the regulator.
	The general issue of promotions will be an interesting double-edged sword for the regulator. I am a commissioner of the regulator that was the first to ban split-level investment trusts at a time when I think the regulator over here was rather slow in being aware of the problems and issues. The very full powers given to the FCA will put it in the limelight to get there in good time and do it right. As I said at the outset, I am certainly not opposed to the power. There has been an obvious need to be able to deal with "wrong" products quickly and effectively. I am still slightly concerned that the framework of the FCA using those powers is pretty broad and I suspect that the FCA itself may want to have a more defined framework for fear of criticism.
	Those are the main thoughts behind my amendments in that area. I thank the Minister for his response, which essentially satisfied the points I raised.

Lord Sharkey: I beg leave to withdraw the amendment.
	Amendment 173ZAB withdrawn.
	Amendments 173AA and 173AAZA not moved.
	Amendment 173AAA
	 Moved by Lord Sassoon
	173AAA: Clause 22, page 81, line 44, after "directives" insert "or the emission allowance auctioning regulation"
	Amendment 173AAA agreed.
	Amendment 173AAB
	 Moved by Lord Davies of Oldham
	173AAB: Clause 22, page 82, line 10, at end insert-
	"( ) provide for a requirement that an employee representative should be a member of the remuneration committee of a relevant body corporate; and
	( ) provide for a requirement that the remuneration consultants advising on remuneration policy shall be appointed by the shareholders of a relevant body corporate."

Lord Davies of Oldham: My Lords, this amendment raises issues of enormous significance in this Bill and of course with regard to financial services generally. The whole nation is all too aware of the need for effective action on the remuneration of directors of companies.
	In 1980, the median pay of the highest paid directors in FTSE 100 companies was £63,000; by 2010 it was £3 million. In 1980, the median wages were £5,400; in 2010, £25,900. In other words, the ratio of directors' to employees' median pay rose over the 30-year period from just 11 times to 110 times. That cannot be justified by any concept of performance of the companies. The same thing, of course, happened elsewhere. It is not just the United Kingdom. Almost the same figures are to be seen in the United States over that period.
	Of course, it is not as if the crisis that we have gone through in the past five years has enormously changed things. In the past two years we have gone through a double-dip recession. We have seen FTSE share prices stagnating. We have seen significant public sector cuts and rising unemployment. The increase in pay for FTSE 100 chief executives in this period has been 12%, lower than in some years in the past, but how on earth can one justify these increases against an economy that is underperforming and companies that are inevitably reflecting such poor returns?
	It would be remiss if this Bill did not quite specifically address the issue of directors' pay. One important dimension of this is contained in the first part of this amendment; namely that,
	"an employee representative should be a member of the remuneration committee".
	I am not holding out any great hopes that one individual on any remuneration committee is going to work wonders, but I am saying that it would force the remuneration committee, and directors, to take recognition of the absurdities of the past three decades and get things back into some proper balance between achievement and remuneration.
	The second point of the amendment is also fairly clear. This situation has developed partly because the remuneration committees are not only hopelessly unrepresentative of the company, they are unrepresentative of anything or anyone except those who are benefiting from these high rates of pay. Consequently, there is an inevitable dynamic to build lavishly on the past. I do not excuse the public sector from this. We have seen it in the public sector, with similar increases in the relationship between chief executives of local authorities and the median pay of their workers-not in the same proportions as in industry and finance but nevertheless significant and unjustifiably so. You see the same factors at work; namely, that the remuneration committee is not significantly representative, and that the remuneration committee says, "Of course, in order that the reputation of our organisation should be enhanced or at least match a comparable organisation, we have to show that we pay our chief executive significant sums".
	We have got to get a grip on this situation. This Bill provides for remuneration to be considered. This amendment makes quite explicit two bases on which the Bill could be significantly and precisely amended to improve things. I beg to move.

Lord Davies of Stamford: My Lords, my noble friend and namesake has put forward a most valuable amendment, and I support it.
	I have a long-standing interest in the subject-no longer a financial interest but in the past I have served on the boards of both financial and non-financial companies and institutions. Until I joined the Government I was chairman of the remuneration committee of the largest building and concessions group in the world, Vinci, which had then more than 150,000 employees and €30 billion in turnover. I was therefore in a fairly prominent position with regard to remuneration decisions.
	I have no financial interests at all now in industry or business but I still have a great continuing intellectual interest in this subject and a very pressing policy interest, for exactly the reason that my noble friend has set out. The excesses of remuneration that we have seen over the past few years, both in this country and elsewhere in the EU and the US, have contributed greatly to the malaise we currently face, and of course a great many of the worst abuses-although not all-have arisen in the financial services sector.
	That situation is not good for the future effective performance of a capitalist market economy, and it is certainly not conducive to a happy society. This is an important and pressing problem. My noble friend has obviously given this matter a great deal of thought, and has come up with two excellent suggestions to deal with it, although he himself said that no one solution-let alone a purely legislative solution-will solve the whole problem.
	I deal in turn with the two proposals he has put forward, first in relation to employee representatives on the remuneration committee. Vinci, a multinational, is a French company, and we therefore had the benefit of two employee representatives on the main board. I have become a considerable supporter of that system. I made a proposal in the formal consultation that the Government launched a few months ago on corporate governance. Nothing much seems to have happened to it, unfortunately. I wrote to the Minister and spoke in this House, suggesting that we should incorporate the same provision in this country's company law in future. When I was chairman of the Vinci remuneration committee, I explored the possibility of putting one of those two employee representatives on our board, on our remuneration committee. I discovered, however, and I think my noble friend may find this helpful, that the individual concerned had a certain personal reluctance to do that. I think he felt that he would spend all his time with his workmates defending any level of executive remuneration, which was bound to be much greater than that of his workmates, and that his life, job and role would be rather blighted as a result. So the right solution may be to introduce an element of compulsion. It is not a magical solution, but it can only be helpful.
	My noble friend's second proposal is even more important. He raises the issue of remuneration consultants. I do not think there has been anything like enough attention paid to the role of remuneration consultants. I have not seen any articles in the financial press or otherwise about the role of remuneration consultants. As far as I know, the matter has never been raised in this House and it is time that it was. Every major public company will have remuneration consultants reporting to the remuneration committee, and we had that in Vinci. However their influence was quite nefarious in many cases. The reason for appointing them was often simply to protect the remuneration committees or the boards from criticism. People often hire executive search consultants for similar reasons. It is not merely for the value that they add, although they do add a lot of value in certain cases. It also protects the boards against any accusation of cronyism or nepotism. In the same way, companies automatically take on remuneration consultants, which is a valuable business for them.
	The only remuneration consultants I have ever come across are subsidiaries, either of executive recruitment firms or of accountancy partnerships or firms. They have almost a universal franchise now. Everybody feels they have to hire them. In practice the way they work is very dubious. They carry out for their clients a survey of the executive remuneration in comparable companies of a comparable size in a comparable sector, and then present it to the remuneration committee with a proposal for a level of increase for the senior executives for which the remuneration committee has a responsibility.
	Let us say that the average increase is 10%, just to have easy figures to deal with, and they say, "We think 10% is appropriate". However, remuneration consultants like to flatter their clients, in which case they add one or two points on top of that. The board, particularly the remuneration committee, may feel proud of their firm, and feel attached to their chief executive. They will want to encourage him and not humiliate him. So they will probably say, "Okay, we'll give him 13%". That will be good in relation to competition. They will be saying to the public that they think they have the best chief executive, the best finance director, and the best senior executives. That is fine. The decision is taken. Everybody feels protected and covered by the fact that they have had professional advice from professional remuneration consultants. The next week, the remuneration consultants go on to their next client, and they say "The latest figure is actually 13%, so you may want to start with that figure as your basis".
	I would not be talking about recruitment consultants in the House of Lords without having a lot of experience of the subject or having thought carefully about it. These remuneration consultants do amount to a kind of engine of inflation of remuneration of senior executives. The sooner we face up to that the better.
	If we face up to it, what do we do about it? My noble friend has come up with the solution that the remuneration consultant should be responsible to the shareholders, rather than the board. Again, it very much depends on how that is interpreted, how it works in particular cases. There is no solution and no magic wand and I know my noble friend would be the first to say that. However, if we want to change the culture-I think we need to do so-this is a good and sensible way forward.
	There has been no collusion at all between myself and my noble friend on this matter. I had no idea he was going to put down this amendment until I saw the Marshalled List today. However, I do think it has been particularly well-conceived and is particularly pertinent, whether or not it is accepted immediately by the noble Lord, Lord Sassoon. The noble Lord, Lord Sassoon, never seems to accept proposals put forward on any Bill that I have seen him taking through, although he is a very competent Minister, but he seems to be very embattled whenever anybody makes a suggestion for improvement. Whether the Government are prepared to accept that today or not, I do hope that my noble friend's initiative will start a debate on this subject and cause a lot of though to be put into this subject, and action to be taken on this matter, which seems to be very necessary.

Baroness Noakes: My Lords, I do not like to disappoint the noble Lord, Lord Davies, but this is not the first time that recruitment consultants have been debated in your Lordships' House. I recall more than one occasion when we had a discussion of the role of recruitment consultants in the levels of pay within the financial sector and more generally, but before the noble Lord joined your Lordships' House. It is a subject which has previously arisen and I am sure that if the noble Lord searches Hansard he will find earlier debates.

Lord Davies of Stamford: My Lords, I daresay I stand corrected. I am delighted to hear that I was wrong in that respect.

Baroness Noakes: More broadly, I think everybody accepts that executive pay has some problems attached to it. I do not wish to dismiss the amendments of the noble Lord, Lord Davies of Oldham, out of hand, although it will not surprise him to find that I do not support his amendments. I do not support them because they come close to interfering in the corporate governance model, which broadly serves the UK extremely well. The corporate governance model has boards which are responsible for making decisions, and these boards have committees of boards, including remuneration committees, which are responsible to those boards. To insert somebody who is not a board member outwith the context of having employee representatives on the board starts to change that dynamic. Similarly, if you have remuneration consultants who should be reporting independently to the remuneration committee being appointed by the shareholders, it is difficult to see what the relationship then is to the board and the board's committees. There are a lot of problems in the solutions that have come up.
	Remuneration is under huge scrutiny. There have been proposals from BIS in the last few years, and the regulatory ratchet has been increased with greater intensity. The involvement of the FSA, for example, in banking and other financial institution regulations, is not minor, and equally with regulators in other parts of the world. So we may have a problem which almost certainly will not be addressed by the amendments before us and which already has a lot of moving parts.

Lord Davies of Stamford: I am most grateful to the noble Baroness for giving way a second time. I wanted to rise to agree with her. She is absolutely right. You should never put on a remuneration committee someone who is not a member of the board. The remuneration committee must be a sub-committee of the board, and it was in the context of employee representatives being fully members of the board in every possible sense, that I put forward my suggestion.

Baroness Noakes: I am pleased to see that we are in agreement. Finally, I was concerned whether or not the noble Lord, Lord Davies of Oldham, thought that his amendment meant that all listed companies would be dealt with by the PRA and the FCA, because I do not think they have powers to deal with other than those bodies that are within the regulatory net, so it would only cover a relatively small proportion of his target.

Lord Sassoon: My Lords, my noble friend has made the first point that I would make. The noble Lords, Lord Davies of Oldham and Lord Davies of Stamford, talked as if we were debating provisions that related to all listed companies, but my noble friend is completely right that this section does not apply to great global companies such as Vinci and others. Although it relates to an important group of companies, it is related essentially to authorised persons.
	The Bill allows regulators to make rules regarding the role of employees in relation to remuneration committees and, in theory, the requirement that remuneration consultants be appointed by shareholders if they think that such rules would advance their objectives. However, I accept that, in practice, it is uncertain that that test would be met, particularly in the latter instance. In any case, other appropriate processes are already in place to consider these questions in the context of wider corporate governance reform-which, again, is precisely the point that my noble friend makes. This is a wider series of issues.
	It is important to be reminded that, in January this year, the Department for Business published its response to its consultation on executive remuneration, which considered among others, the possibility of giving employees a say on remuneration. Although I do not want to be drawn into a wider debate-we should focus on financial services-the consultation responses nevertheless illuminate what would be appropriate or, as I would say, inappropriate for financial services businesses alone.
	The Government's view is that, while there will be qualified and enthusiastic employees willing to take on such a role, there are strong arguments against this proposal, including-on this I agree with the noble Lord, Lord Davies of Stamford-that members of the remuneration committee need to be full board members if they are to understand the overall financial strategy and the wider business and economic context which impact on remuneration policy; that introducing external representatives on a single committee risks obscuring directors' collective responsibility, as well as potentially creating additional tensions, which might reduce the effectiveness of the UK unitary board model; and that the level of responsibility of employee representatives and the possible conflicts of interest they might face would need to be resolved.
	As a result of the BIS consultation on executive pay, the Government have decided to proceed with some key reforms, such as the introduction of a binding shareholder vote on remuneration, but the case for requiring companies to include employees on remuneration committees has not been made, and the Government are certainly not going to make or accept it in the narrower context that we are discussing today.

Lord Flight: When I sat on the remuneration committee of a financial services business, we already received substantial directions from the FSA as to what we were supposed to do, what we should do, how much we could put up pay and all sorts of things. I find it somewhat strange, but the direction is there and functioning already.

Lord Sassoon: Again, my noble friend is ahead of me and I shall not make that point-I am addressing some very narrow and specific matters-but he is completely right that we could debate whether the interventions already being made are appropriate. He may say that that they are excessive; I would say, "Well, that is for the FSA and there are important issues". But, yes, the FSA is very active in this area, specifically on remuneration consultants.
	The suggestion that remuneration consultants be appointed by shareholders was looked at in the consultation but it was not widely supported. I am sorry that the noble Lord, Lord Davies of Stamford, did not spot it, but the proposal has been the subject not only of debate in this House in the past but of the recent consultation. It was not widely supported because of the costs associated with the appointment process and issues to be resolved about the remit and the flexibility of the proposal to accommodate new work. The benefits of the requirement would be uncertain.
	However, a majority of respondents to the consultation said that more transparency over the use of remuneration consultants would be beneficial. Suggestions of areas for more transparency included appointment processes, advice provided, fees paid and management of conflicts of interests. The Department for Business is looking at ways in which it can improve transparency in the use of remuneration consultants by companies.
	I am grateful to the noble Lord for raising these important issues, which are being taken forward in a wider context. The FCA will have all the powers that it needs to act in this area, as does already-and as my noble friend pointed out-the FSA. I hope that, on the basis of that information, the noble Lord will feel able to withdraw his amendment.

Lord Davies of Oldham: Of course I shall withdraw the amendment, but not because the noble Lord, Lord Flight, has persuaded me that the FSA has been so much a busybody, so interfering and so effective that remuneration has never been an issue in the financial services. That argument runs counter to the facts on remuneration on which the nation as a whole has a firm grip.
	I of course accept the chiding of the noble Baroness, Lady Noakes, that the Bill concerns only the financial services sector. I also hear from the Minister that it is extremely dangerous to take the first step because you might then stumble into the second step, and I am not sure that the Government are that committed to any significant strides forward on that at the present time. However, if the Minister is able to assure me that the development of ideas in the Department for Business is such that we are going to see legislation which gives some effect to the principles that I have adumbrated this evening and which helps to resolve what for the nation looks an outstanding scandal with regard to the issues of distribution of resources in our society, I go home with a little consolation and withdraw my amendment.
	Amendment 173AAB withdrawn.
	Amendment 173AAC not moved.
	Amendments 173ACA, in substitution for Amendment 173AB, to 173AE not moved.
	Amendment 173AEA
	 Moved by Lord Davies of Oldham
	173AEA: Clause 22, page 89, line 27, at end insert-
	"137QA Advisory fees in respect of mergers and acquisitions
	Either regulator may make rules ("fee structures in respect of mergers and acquisitions") about the advisory or consultancy fee arrangements where an authorised person contracts a third party to give advice on the possibility of a merger or acquisition of control of any other body corporate."

Lord Davies of Oldham: My Lords, I assure the Committee that I shall be brief, being cognisant of the passage of time. The amendment is simply the product of the FSA's report-a report of great significance in which the noble Lord, Lord Flight, would be interested-into the RBS and its merger with ABN AMRO. We all know the significance of that merger and the disaster which befell RBS as a result of it. All that my amendment does is reflect the fact that the fees for the advice on that merger were extraordinarily high, disastrous though the merger proved to be. I merely suggest an amendment to the Bill which would add to the list of general rules the power for either regulator to make rules about consultancy fee arrangements in respect of mergers and acquisitions, and I think that the time is ripe for that. I beg to move.

Lord Sassoon: My Lords, the Government's view is that, in general, decisions about advisory arrangements and consultancy fees are commercial decisions for firms themselves. However, the regulators could in fact already make the rules described in this amendment under the general rule-making power if they judged that was an appropriate way to advance their objectives. For example, if the PRA was satisfied that there was a problem with advisers being incentivised to advise in favour of high-risk mergers and acquisitions in a way that threatened the safety and soundness of PRA-authorised persons, it could step in to make rules to regulate the appointment of advisers.
	Respecting the brevity with which this amendment was introduced, I should probably leave it at those two key reasons why we believe that it is redundant. I ask the noble Lord, Lord Davies of Oldham, to consider withdrawing it.

Lord Davies of Oldham: My Lords, I will certainly withdraw the amendment, having benefited from the clarity of the Minister's reply-although I cannot say that I agreed with it.
	Amendment 173AEA withdrawn.
	Amendments 173AF to 173D not moved.
	Amendment 173E
	 Moved by Lord Davies of Oldham
	173E: Clause 22, page 102, line 10, at end insert-
	"( ) Before the end of 2013, a regulator may, in consultation with HM Treasury, ask the Competition Commission to provide a report giving section 140B advice with reference to the Independent Commission on Banking recommendations on competition."

Lord Davies of Oldham: My Lords, I am once again jettisoning a whole sheaf of notes in deference to the hour that we have reached. Amendment 173E, as part of the competition scrutiny provisions included in this Bill, calls for the Competition Commission, in consultation with the Treasury, to publish a report by the end of 2013 providing advice about the effect of regulating provision or practice,
	"with reference to the Independent Commission on Banking recommendations on competition".
	The intention of the amendment is clear. It is to ensure that we make progress with regard to competition in banking, to show that we are in earnest about the necessity for early reforms and to use this Bill and the competition procedures within it to ensure that the maximum pressure is brought to bear on the competition authorities-and of course, behind them, the Government-to take as early action as is possible to remedy what the nation expects to be remedied in the light of the experience of the recent past. I beg to move.

Lord Sassoon: My Lords, this amendment is identical to one tabled in Committee in another place, where my honourable friend the then Financial Secretary set out the reasons why the amendment is not appropriate. There are three such reasons. First, 2013 is the wrong time for a review of progress against the ICB recommendations. The ICB report itself recommended that the earliest that the market should be reviewed is in 2015, when it will be clearer whether its recommendations have led to improved market conditions. Secondly, there is no convincing reason why this review, if there is to be one, should be limited in scope to the ICB recommendations themselves. There may be new issues that the ICB report had not considered in depth and which it would be expedient to review at that time. Thirdly, we do not need this provision to ensure that the banking sector receives appropriate scrutiny from the competition authorities in the short term. The OFT, for example, launched a review of the personal current account market in July this year, which is likely to consider some of the issues covered by the ICB. The OFT has a power to refer markets to the Competition Commission at any time if it considers that a feature of the market,
	"prevents, restricts or distorts competition ... in the UK".
	I am very happy to give those reassurances and clarifications to the noble Lord in the hope that he will withdraw his amendment.

Lord Davies of Oldham: My Lords, of course I will withdraw my amendment. However, the noble Lord should not anticipate that when a Minister speaks in the Commons, the Opposition automatically assume that he has always produced exactly the accurate response to our amendments, which we then accept, and that we are duly grateful for the greater wisdom of the Administration. Far from it-we often derive some considerable satisfaction from pressing them at some length on another occasion. However, on this occasion I have not got any length. I beg to withdraw the amendment.
	Amendment 173E withdrawn.
	Amendment 174 not moved.
	Clause 22, as amended, agreed.
	Clauses 23 and 24 agreed.
	Clause 25 : Powers of regulators in relation to parent undertakings
	Amendment 174ZA
	 Moved by Lord Sassoon
	174ZA: Clause 25, page 107, line 27, leave out "any part of"

Lord Sassoon: There are of course other amendments in the group but for the moment I will just speak to the two government amendments. New Part 12A of FiSMA, as inserted by Clause 25, confers on the regulators for the first time substantive powers in relation to unregulated parent undertakings of authorised persons. These new powers strengthen the regulatory framework by ensuring that the regulator can take appropriate action in relation to a parent undertaking that itself is not regulated but which controls and exerts influence over an authorised person.
	Amendment 174ZA extends the meaning of "qualifying parent undertaking" so that the new Part 12A powers can also be applied to body corporates which have a place of business in the United Kingdom. At present, the powers are restricted to a parent undertaking that is a body corporate incorporated in the United Kingdom. There is a risk under the new Section 192B(2), as currently drafted, that some financial groups may be beyond the scope of new Part 12A powers or indeed may engage in regulatory arbitrage and restructure their operations to remove themselves from scope. Left unchanged, it would be possible for a firm to evade the powers by incorporating their parent undertaking overseas while retaining a place of business in the UK. It is important that the powers can be deployed for the purpose for which they were designed.
	Amendment 174ZB is a bit of small tidying up of the drafting. As there is only one system of company law in the UK, it is not possible for a body corporate to be incorporated only in "part of" the UK. That is why we are making that second amendment. I beg to move.

Lord Whitty: My Lords, I am perfectly happy to accept and support the Minister's proposals. My two amendments, and I think those of my noble friend Lord Tunnicliffe, attempt at this point to reflect the reality of the changing structure of banking and the potential changing structure of financial services, and their interrelationship with retail. It could go wider than this, but it specifically relates to the phenomenon of supermarkets obtaining banking licences, establishing banking subsidiaries and operating in the banking and financial services area.
	This presents significant issues of consumer information and consumer privacy. My first amendment is a simple one. We have, in this Bill, a number of safeguards in relation to financial companies' relations with their parent company. However, among other things, subsection (4) of the previous Act's proposed new Section 192B defines a parent undertaking that is susceptible to these protections:
	"Condition C is that the parent undertaking is a financial institution of a kind prescribed by the Treasury by order".
	It then goes on to say that those conditions can be changed by the Treasury. However, the reality is that Tesco-I am not particularly having a go at Tesco-would not fall within that definition. Yet Tesco will have a banking operation and has every intention of building on that. My first amendment would therefore delete that restriction, so that a parent undertaking of a financial company could, in fact, be a company of any kind and not simply one which falls within the Treasury's-from time to time altered-definition of a financial institution.
	My second amendment relates directly to the area of potential consumer detriment. Again, I take the example of Tesco. There have been examples in the United States already, so it is not necessarily directed at Tesco; I have a Tesco card myself, as I am sure many other Members of the House do. I would not presume that Tesco would be in a position, deriving data from my Saturday afternoon purchases, to offer to their banking subsidiary indications of my current or potential credit-worthiness. Noble Lords may feel that I do not need that protection, but there will be many who do. The pattern of purchases, particularly for the more vulnerable consumers, can vary dramatically from time to time as circumstances change. Their credit-worthiness can alter if the interpretation of that data is such that the banking subsidiary thinks that they are no longer as credit-worthy as they were last month or last year.
	This is an issue of privacy. This is an issue of clarity. It is an issue of confidence that consumers who have quite happily allowed the retail parent company to acquire very detailed information on their purchasing patterns should not have that information used for the entirely different purpose of establishing credit-worthiness and the ability to seek loans, overdrafts or banking facilities from a banking subsidiary. I emphasise this because the change in the structure and interface between banking and large-scale retail and other conglomerates is likely to get larger. In broad terms, the consumer interest benefits from this wider competition and the expertise that it may bring. However, Tesco itself has recognised that one of the synergies arising from its move into the banking sector would be using the club card for credit assessments, and one which, alongside a loyalty scheme, could benefit the banking as well as the retail side of its business. I do not think that that is right. I do not think that the ordinary consumer who goes to Tesco every week would think that it is right. It is, of course, also a facility available to a banking subsidiary of a supermarket which is not available to its competitors, who are part of a purely banking or financial institution.
	I hope that the Minister will recognise this problem, and will at least agree that the first deletion is appropriate and to take away the issue raised by my second amendment and come back to us at a later stage, indicating his way of dealing with it. It is an issue which, as I say, is likely to grow in importance and makes hundreds of thousands of consumers vulnerable. I do not beg to move, as the Minister has done so, but I hope that he will take my words into account.

Lord Tunnicliffe: My Lords, I agree with all the points that my noble friend Lord Whitty has made and I will not rehearse them. Coming at the whole thing from a slightly different direction, it seems to me that Clause 25 is highly admirable. It seems to say that if you have an authorised person and that authorised person is owned by someone else, the regulator must be able to get at the someone else. It is a sensible clause in that it uses terms such as,
	"may have a material adverse effect on the regulation by the regulator".
	It uses that twice, in both of the conditions in which it can happen. It is a very narrow clause. It is what we who like regulation find very good at setting out what the regulator may do.
	Clause 25 also says that a regulator must adhere,
	"to the principle that a burden or restriction which is imposed on a person should be proportionate to the benefits, considered in general terms, which are expected to result from its imposition".
	So the whole idea that the owner of a regulated person should come under regulation seems entirely a sign of good principle, and has proper safeguards set against it.
	However, for the life of me I cannot understand what new Section 192B(4) is doing there. It states:
	"Condition C is that the parent undertaking is a financial institution of a kind prescribed by the Treasury by order".
	Any owner of an authorised person should be susceptible to regulation within the limitations set out in Clause 25. This was debated in the Commons, but we make no apology for bringing it back here. In the Commons, Mr Hoban said:
	"This is a proportionate expansion. We want to avoid the sense that the FCA or the PRA could intervene in the price of bread at Tesco or Sainsbury's".-[Official Report, Commons, Financial Services Bill Committee, 8/3/12; col. 466.]
	That is an absolutely ridiculous reason to deny it. Clearly, the body of this clause says that it shall be used for serious material things in a proportionate way, which could have nothing to do with the price of bread at Sainsbury's. I hope that the Minister will give a really full explanation of why this clause should not apply universally to all owners of authorised persons, not just to those as set out in condition C in subsection (4) of new Section 192B.

Lord Sassoon: My Lords, the noble Lords, Lord Whitty and Lord Tunnicliffe, have been very clear about the purpose of these three amendments: that they seek to extend the power to capture all parent undertakings, including non-financial parents. The starting point here has to be the recognition, which was partly given by the noble Lord, Lord Tunnicliffe, that we are talking about some new and important powers that go significantly beyond anything that the previous Government put in place in their architecture.
	I know that the noble Lord, Lord Tunnicliffe, said that he approved of a lot of this. The fact is that we are moving the boundary forward very significantly, but to an appropriate place for the time being, while nevertheless taking the power-the noble Lord, Lord Whitty, recognised this-to move the boundary further if appropriate. I would have been rather happier if there had been more of a tone of approving of and recognising a significant shift, and gently encouraging us onwards, rather than a tone of outraged incomprehension that we have not moved very much further.

Lord Tunnicliffe: If I can help the Minister, I am entirely happy to welcome this clause-my opening remarks welcomed it-but I cannot understand why it has this serious limitation. The rest of the clause is beautifully balanced and seems entirely appropriate. Why does it not apply to more owners?

Lord Sassoon: My Lords, we are getting into significant new territory here. These are untried and untested powers in the United Kingdom. We want to make sure that they are targeted and used in a proportionate manner. That is why the Government have proposed limiting the powers to parent undertakings that are financial institutions of the kind described by the Treasury, which helps to keep this new and very significant power within acceptable bounds-and bounds within which Parliament can be clear about the movement of the regulatory boundary. I take the case of the supermarkets because they are an important area and the clearest case of where the boundary should be under focus. It is important and helpful for noble Lords to raise this matter in debate now, because it is quite proper that as experience of these new powers is gained and the evolution in the structures of holding companies for financial services institutions moves forward, these matters are kept under some form of scrutiny.
	Let me deal first of all with the specific matter of data sharing, because this is a granular thing that affects customers in these groups now. The Data Protection Act 1998 already provides robust safeguards around the disclosure of customers' personal information, including disclosure to another group company. Therefore, in the case which the noble Lord, Lord Whitty, postulates, the movement of data from one part of a group-the non-financial part-to the financial part will require consent from the consumer.
	The Act also requires that the personal data have been obtained fairly from the customer in the first place, which would involve identifying any third parties to which the information would be disclosed. We believe that the current provisions in the Bill-in that specific respect and more broadly-strike the right balance between giving the regulator more intrusive powers over unregulated parent undertakings, protecting the personal data of consumers and ensuring that the net regulatory burden imposed on industry is proportionate.
	However-and I restate this-the Government are very much alive to the concerns raised by noble Lords, and it is precisely for that reason that they have taken a power to remove the requirement that the parent undertaking be a financial institution. We have not put that in there unthinkingly; we have put it in there because we recognise the concerns that noble Lords have raised. I am sorry if the noble Lord, Lord Tunnicliffe, does not think that I have recognised the positivity with which he has come at this clause, but he does not perhaps recognise or give enough weight to the fact that we really are making a significant step forward and need to pause and think carefully before going further. The power, however, is there and the Government will use that power as and when it becomes clear that the balance needs to be struck differently. I am happy to restate that, so I hope that what I have said will reassure noble Lords that the Government take this matter very seriously.
	Amendment 174ZA agreed.
	Amendment 174ZB
	 Moved by Lord Sassoon
	174ZB: Clause 25, page 108, leave out line 25 and insert "which-
	(a) is incorporated in the United Kingdom, or
	(b) has a place of business in the United Kingdom."
	Amendment 174ZB agreed.
	Amendments 174A to 176 not moved.
	Clause 25, as amended, agreed.

Lord Newby: My Lords, I beg to move that the House do now resume. In doing so, I inform the House that because the Question for Short Debate tabled by the noble Lord, Lord Alderdice, will now be taken as last Business, the time limit for the debate becomes 90, rather than 60, minutes. Speeches should therefore be limited to nine minutes, except for those of the noble Lord, Lord Alderdice, and the Minister, which will remain limited to 10 and 12 minutes respectively.
	House resumed.

NHS: Mental Health Services
	 — 
	Question for Short Debate

Tabled By Lord Alderdice
	To ask Her Majesty's Government how they propose to strengthen the provision of mental health services in the National Health Service.

Lord Alderdice: My Lords, the noble Lord, Lord Layard, and his colleagues at the Centre for Economic Performance produced an excellent document in 2006, The Depression Report. This important document pointed out that, within the community, a massive amount of distress was caused by depression and anxiety. They were a major form of deprivation of normal life-one which was going largely untreated for the majority of patients. They invoked huge economic cost to those concerned, to their families and to economic life in the country. He and his colleagues pointed out that there were treatments available at that time and they were not incredibly costly or unnecessarily long-term.
	Therefore, the report recommended a substantial investment in the training of therapists in NICE-approved trainings, working in teams and supplied with centrally commissioned funding. Over a period of seven years, this would achieve a major change in providing psychological therapies for people suffering from depression and anxiety. This was a very important report, but it was also an effective one, because based on that-and with much other work-the noble Lord, his colleagues and others who supported him were able to persuade the Government to make a significant investment at the time and to press for substantial changes.
	Even at the time, I was a little anxious that the focus of this whole programme to increase access to psychological therapies was on cognitive behavioural therapy and some other therapies approved by NICE. One of the reasons for that was not that I had any kind of crib about those approaches to therapy, but because it seemed to me that they were relatively new and espoused with a degree of evangelical zeal. One of the things that we do know, after a long period, is that every new therapy that comes in-when it is passionately pursued by committed people-very often shows itself to be effective with patients. Then, after a period of time, it is maybe not quite as effective: not because it is not a useful therapy or a good approach, but because it is probably the case that most of these approaches to therapy, given the right therapist-the person with the right personality and training-the appropriate patient and the development of a therapeutic relationship, can be substantially effective. With the wrong personality of therapist, the wrong personality of patient and the wrong problem, they can make the situation much worse. So we know, for example, that if we use short-term therapies for people with certain kinds of personality disorders, it can make the situation much worse rather than better. Those are patients who require a longer-term approach to therapy and often a multidisciplinary team bringing various different kinds of skills.
	I am not terribly surprised now to find, for example, that although the Swedish Government spent almost £200 million on training therapists and providing services that were almost exclusively CBT-other kinds of therapy were pretty much set aside, which was not the case with IAPT, to be fair-they began to conclude, as was published recently in the major Swedish social work journal, that this was not necessarily the way forward and that it was the therapeutic relationship with a patient that was important. That is not a criticism of that approach to treatment because the same criticism could be made of many others. It simply is to say that all the time we should continue to develop our understanding and evidence base. We cannot assume that when we have demonstrated something, that is it and we can put it to bed, forget about it and not explore it any further. We need to keep working at it.
	It also demonstrates that psychological approaches of various kinds are effective, sometimes remarkably effective. However, it has to be the right treatment, the right training, the right person over the right period and so on, which requires a lot of work and a multidisciplinary and multimodal approach. It requires a number of different approaches to therapy. I mention that at this early stage because I always want to get that out of the way.
	One could make certain criticisms but the report had a tremendous effect. It jolted the Government into starting to provide significant amounts of money for training, for bringing people forward and for valuing psychological therapies. Therefore, when the noble Lord, Lord Layard, contacted me earlier this year and said, "John, we have another report coming out", I was very excited because I knew that the quality of the report would be high, the argument would be persuasive and that it would be done to improve things for our patients, which is the important thing.
	When the report was published in June, I was not in any way disappointed. It was all those things. It was concise and clear, and it pointed at the problem in stark terms that many of us who have worked in this area for years found refreshing. Basically, it made the point that half of all illness is mental illness, which was not a surprise because we have always known that. It has a serious degree of morbidity. People's lives are hugely damaged by mental illness, and there is enormous misery for them and their families. There is a huge cost but there are ways of dealing with these things. In the report, the noble Lord and his colleagues did not deal just with depression and anxiety. They dealt with the whole raft of mental illness, although not particularly with things such as dementia, other more organic disorders and drug and alcohol addiction, which are also important and fall within the wider group.
	I was very keen for your Lordships' House to find an opportunity as soon as possible to ask the Minister what Her Majesty's Government's response is to this report, which is the main burden of my remarks. I think that the report is clear and it marks up a number of issues and problems. I am very proud and pleased that the coalition Government have been prepared to give £400 million to increasing and developing access to psychological therapies. However, one of my anxieties is that I keep getting reports that that money is being substituted, and that some psychological therapy services are being closed down and IAPTs are being increased, rather than that IAPT money is coming in. We do not know whether it is adding to the services that are available.
	Places such as the Maudsley, St Thomas', Forest House in Walthamstow and Camden Psychotherapy Unit have provided well trained and good services. It is not a matter of cost because, in some of these services, the therapists coming in are good, well trained and well supervised people who provide therapy for nothing or for very small amounts of money. But it is easier for commissioners to commission one large organisation to provide one approach to therapy, rather than to pick up those who have very often provided all sorts of different approaches to therapy in the communities.
	After all the things we went through because we want to see a change in the approach to commissioning, I was particularly sorry to hear that some of the new commissioning groups are simply saying, "We are going to carry on the way the previous commissioners were carrying on and we are not going to change". If that is true, it is extremely disappointing. I seek reassurance from the Minister that he will monitor this; that he will make sure that the money is not substituted and is extra money for psychological therapies; that it is for the range of therapies; and that there is an understanding that short-term therapies-for example, for people with personality disorders-are sometimes counterproductive. We need to create long-lasting major change for these people because they are very damaged and need input over a period of time. If we do not do that, they will cost a lot more through the criminal justice system. There will also be a transgenerational transmission of their disorders, which we will need to take into account whenever we think about the costs to the community. We need different approaches to treatment that are suitable to these people.
	My concern is not about just the therapeutic relationship with people in outpatient therapy. I have been very disturbed to learn that in places such as Rampton, Broadmoor and Ashworth, patients increasingly are locked up at night in wards because there are not enough staff. That is not managing the relationship. I increasingly find reports of young doctors who see a patient only once. The patient is checked in and in no time the patient is out. The young doctor does not even learn how to develop the professional relationship. Indeed, there are managerial relationships which are not very professional and are based on no evidence that they bring a positive outcome in the running of services. If we are talking about an evidence base for the therapy, we need an evidence base for some of the management approaches that have been undertaken, which are clearly and demonstrably not working.
	In September, at our party conference in Brighton, I was very pleased that the report from the noble Lord and his colleagues, and the recommendations from it, was warmly and overwhelmingly supported in a motion to the conference. I want warmly and overwhelmingly to support them. There will be some issues, which we will need to explore, including the recommendation that the GPs should get more training in psychological therapies. That is absolutely right but perhaps it should be not only through IAPT teams. Perhaps there should be a bit more of an emphasis on the idea that there might be a range of therapies available.
	I am hugely encouraged that we are seeing some espousing of this by the academic community. I trust that the £400 million will be extra money and that it will be added to. I know that the Minister is sympathetic to this but I hope that he will give us a little more than sympathy and reassurance. I hope that he will be able to encourage us as we see this developing over the coming months and years.

Lord Wills: My Lords, I congratulate the noble Lord, Lord Alderdice, on securing this debate on this most important subject. It is a tribute to his work, and to my noble friend Lord Layard and other speakers in this debate, that nowadays this Government accept without question, as did the previous Government, that there is no health without mental health. That is huge progress from the situation just a few years ago.
	However, as the noble Lord suggested, there is no reason for complacency. There are formidable challenges ahead. Others noble Lords with far greater experience in this sphere than I have will no doubt speak about those challenges in the rest of this debate. In my few remarks I want to focus on the role of the voluntary sector in delivering mental health services and, in particular, something that might be able to be done to support it.
	The voluntary sector has become more and more important in delivering mental health services. We heard a few examples from the noble Lord, Lord Alderdice, of its invaluable work in delivering mental health services and in providing care and support to well over 500,000 people who use mental health services every day across England in a wide variety of community and hospital settings.
	The voluntary sector is by nature more heterogeneous than statutory health and social care organisations. It is that very variety that has helped generate much of the innovation that service users value in the delivery of mental health services. But it also makes more demanding the task of supporting it through all the challenges that it faces. I should be grateful for any detail that the Minister can give about how the Government intend to support voluntary sector organisations in the months ahead, with all the difficult challenges of funding that we all recognise. Earlier this year, in a statement of the Government's intent, a recently departed Health Minister said:
	"It is crucial that we continue to champion our voluntary organisations, because their expertise allows them to design and develop innovative solutions to the big challenges we face in health, public health and social care".
	It would be interesting to hear how the Minister intends to continue that theme and support voluntary sector organisations in the months and years ahead.
	Among all those challenges that the voluntary sector faces, including the fundamental one of adequate and sustainable funding, it needs to negotiate its way through a thicket of complex statutory provision.
	There have been two major mental health Acts in the past 10 years and more than 100 pieces of legislation that might be relevant to those delivering mental health services. That is daunting to work through for anyone, but especially for those operating in the voluntary sector, who often do not have any significant back-up or support at all. That is why it is very welcome that the Mental Health Providers Forum is about to publish a resource that brings together in one place the most commonly used legislation in mental health to show how it relates to policy and practice, as well as to the experience of all those who use mental health services. The Department of Health should be congratulated on its role in funding the development of this resource, which will help practitioners, managers and trustees to combine legally sound decision-making with safe and effective practice. I hope that the Minister can assure me that he and his department will do all they can to bring this resource to the attention of all those concerned.

Baroness Meacher: My Lords, I congratulate the noble Lord, Lord Alderdice, for tabling this important debate; a debate, in my view, of national importance and of particular importance to the Government in their quest to take a million people off employment support allowance, or, in the future, universal credit figures within about 10 years. That is a major objective of this Government. We know that more than 40% of ESA claimants have mental health problems, the vast majority having depression or anxiety. That is nothing new. We also know that NICE recommends improving access to psychological therapies, and CBT most particularly. Not everyone likes the conclusions of NICE, or IAPT, but we have to take seriously the enormous amount of work that NICE does in looking at all the research available on a subject such as this and drawing its conclusions.
	I do not share the views of the noble Lord, Lord Alderdice, that the style of therapy does not matter too much and that you can have bits here and there. This is a much more serious matter and people who practice these therapies tell me that these treatments, like other medical or pseudo-medical treatments, are potentially dangerous if they are not done really well. The quality of the therapist is absolutely vital and the methods and the types of therapy that they use. If we want to help people, rather than make them worse, it is no good using the wrong type of therapies, or short-term therapies, with the wrong kinds of people. We have to be very careful. It is essential that these IAPT services are of the best possible quality, which means, of course, using the best possible people. These services need to be available right across the country, so that GPs, wherever they are, can refer people for such help so that they do not lose their jobs-that, surely, has to be the first priority-or, if they have already lost their jobs, so that they can be prepared, as soon as possible, to get back into work and stop claiming benefits.
	I shall leave my noble kinsman Lord Layard to talk about the national perspective. I shall talk about what is going on on the ground, as I am familiar with that. One problem is that the tendering process can result in services being provided by two or three different organisations. Far from just giving these services to the NHS, our experience is that they tend to be divided between different organisations. That may be all right but, over the years, health and social services have struggled to ensure that services provided across several organisations hang together and provide a good pathway of care for patients. It is very difficult on the ground; it sounds nice, but it does not work. The second best solution is to ensure that these different organisations work effectively together so that patients have a good pathway.
	Competition rules may be being misinterpreted, but commissioners on the ground understand that these different organisations must use different IT systems, even though they are very happy to use the same one. The result is that these organisations do not communicate effectively with each other. That may be due to the limited understanding of commissioners. I do not think that the problem lies with competition, per se; I think it lies within the capacity of commissioners to operate competition in the best interests of patients and, to be perfectly frank, that simply is not happening.
	Another issue is the tariff for IAPT services. The "any qualified provider" guidance for commissioners makes it clear that local commissioners should set their own tariffs. We know what happens if they do that. We know that the money supposedly put into IAPT psychological services is not ring-fenced and that local authorities are tempted to siphon it off into other things, and who can blame them? I do not blame them, but it means that we have to be very careful if we want a really good psychological service to deal with the unemployment problems of people with anxiety and depression. We cannot cut corners and a lot of tariffs are being set too low because of a lack of understanding.
	The most serious problem, as I understand it, applies to steps 3 and 3 plus services. To treat effectively those with severe anxiety, severe obsessive-compulsive disorders and those with tricky, difficult and often multiple problems we need skilled therapists. That cannot be done by a low-cost therapist. Under AQP rules, a session of high-intensity therapy costs £40 to £50. High-intensity therapists themselves will cost more than that. There are also other costs such as administration, office costs and so on. However, when properly funded, we know from research that these services are highly cost effective; they get people back into work. The big question is why this is happening.
	Even if trusts downgraded their intensive therapists from band 7 to band 6, which will inevitably mean losing their very best people-the noble Lord, Lord Alderdice, said, that they should not do that-and even if they made huge and probably unrealistic assumptions about productivity, organisations could not afford these services at steps 3 and 3 plus. My understanding is that steps 1 and 2, although challenging, will be deliverable. The whole benefit of the IAPT programme is that it is a stepped care programme. If someone is identified as needing step 2, and after a bit the therapist realises that that person has much deeper and more extensive problems than they originally presented with, they will need step 3 and if step 3 is not there, the value of step 2 will be lost. Such people will not get better and they will lose their jobs or not get back into work. That is the sort of concern felt at the bottom, where people are trying to deliver these services. I am not saying that they should all be delivered by the NHS. The NHS is having to renegotiate contracts and is having to cut the amount of money to deliver the same service, or something nearly as good. However, with IAPT it is not like that; it will all be tendered out, and change will be much more radical.
	The view that I have had from others is that this consequence is more of a cock-up than a conspiracy. People are not trying to destroy this, but these AQP services will go live in November 2012 through to March 2013. The consequences of all these inadequate tariffs and problems on the ground, separating the different bits of the service across organisations, will become apparent during that six-month period and will get worse over time.
	Before I finish I want to refer to a rather nice little piece of information, which supports my concerns. I happened to be at the Verulam School in St Albans talking about the House of Lords last Friday. The sixth formers were an impressive group of people. They were so concerned about mental health among young people-that is, themselves-that they undertook a survey of 1,800 young people in the St Albans area, which is not known for its deprivation. They really got at some of the problems and concluded:
	"The value of mental health provision and the overwhelming need for it has become clear to us, as has the need for appropriate access and early support".
	They were very concerned about cuts to counselling support services for young people in St Albans. If you go along to east London things are even tougher, but it was interesting to find that result in a relatively well heeled part of the country.
	I appeal to the Minister to do all that he can to rescue this inexpensive and highly cost-effective contribution to the Government's goal to reduce unemployment. Will he try to ensure that IAPT is removed from the AQP system, if at all possible, even at this late stage? Will he try to secure the continuity of the central policy unit for IAPT? Those two things would transform everything. I have great trust in the Minister and look forward to hearing his comments.

Lord Layard: My Lords, I, too, am grateful to the noble Lord, Lord Alderdice, for securing this debate. I declare my interest as a national adviser to the IAPT programme and chair of the group to which the noble Lord, Lord Alderdice, referred.
	We are now at a critical juncture in relation to the IAPT programme. On the one hand, we have some wonderful features. We have the Government's commitment to parity of esteem for mental health, which is very important. For the out-service we have the Government's commitment to providing treatment in 2015 for 15% of the 6 million people suffering from depression or anxiety disorders, which is a very important commitment. As part of this, the Government have also committed to training 800 therapists a year over a three-year period.
	The issue is what is happening on the ground. Up to 2011, the programme was an extraordinary success. Starting from scratch it reached, within three years, 10% of those 6 million people. That is extraordinarily good going from a standing start. This is not a service that was being modified; it was created in a vacuum, which was a really major achievement. Equally, on the training side, 3,400 therapists were trained in evidence-based therapies, using a state-of-the-art national curriculum developed by the central team and its experts. The outcomes were also good. Recovery rates approached 50%, which was the target, and the programme has been extraordinarily successful in measuring the outcomes of its patients. In fact, it has accumulated the largest body of patient-reported outcomes, physical or mental, in the whole of the NHS.
	All these achievements have been brought about by the fact that there was a central leadership with good administrators and a good network of experts co-ordinated within the Department of Health and by the extraordinary contribution and self-sacrifice of the outstanding clinical director, Dr David Clark-I must mention that because we have been extraordinarily privileged to have perhaps the world's leading clinical psychologist leading this programme. It is therefore not surprising that the world's leading scientific journal, Nature, last week acclaimed this as a world-beating programme. People all over the world are looking to it to see if it can continue developing.
	However, although the programme is only half way through its development phase, its future is already in doubt and, as I mentioned, the Government are at serious risk of not achieving their commitments for 2015. In 2011-12 there were 530 training places, not the Government's commitment of 800, and numbers are looking even more precarious in the present year. Services for patients are not expanding, as would be required to get from 10% to 15%, but are being cut in some localities and are standing still in others. At the same time, waiting times in IAPT are rising.
	Also increasing is the problem, which was just referred to, of commissioners focusing, through their financing arrangements, more on those who need the least help-the easiest to help who can be dealt with cheaply. There is a serious dead weight if you give the help to the people who least need it. That will increasingly go on under these financial pressures unless serious steps are taken to stop it.
	What can the Government do? As the services are locally commissioned, the Government have no way to force local commissioners to spend the money that was set aside in their baseline for IAPT in the spending review. They do, however, have tools, the first of which is the central guidelines embodied in the NHS outcomes framework. This is what commissioners read. They cannot read all that paper and prose but they can read the one sheet that contains 60 outcomes for the NHS. Where does IAPT appear in those 60 outcomes? It does not. That is just not good enough.
	Depression is 50% more disabling than most of the chronic physical illnesses that are now a big focus for the NHS. Depression and anxiety account for at least one third of all morbidity in Britain. The NHS is there to deal with the mass of morbidity in the country, so how can it possibly be that the main treatment for those conditions is not in the NHS 60 outcomes? I agree that this is not a conspiracy, but it is a failure which happens because mental health so often gets overlooked. Unless we have IAPT outcomes within the NHS outcomes framework, it is nonsense to be talking about parity for mental and physical illness.
	We have waiting time targets for all physical conditions treated outside general practice, but there are no waiting time targets for depression and anxiety. That is not parity of esteem either. There is also a huge problem with local commissioners paying less and less for therapy, leading to a bias against those in greatest need. We need a central initiative and national tariffs if we are to secure parity of esteem for serious mental illness as against physical illness.
	I must come, finally, to the question of the central leadership of the programme, which is, as I explained, why it has succeeded. The programme is only half way through its development but its present coverage is 10% compared to the 15% to which the Government are committed. Even then, the programme will not have touched most of the 3 million people with physical conditions who are also mentally ill. This problem has not yet been tackled, although it is costing the NHS a huge amount in the physical healthcare budget due to the comorbid mental condition. The estimate is that something like £10 billion a year of the NHS physical healthcare budget relates to comorbid mental conditions that ought to be treated. Big savings could be made from that. We claimed in our report that at least half a billion pounds could be saved by extending psychological therapy to that group. Extending IAPT on that scale would cost the NHS nothing in net terms. On top of that, it would save the DWP and the Treasury the money on benefits, which would again repay the cost of the therapy. However, none of this will happen without central leadership. It really is just like that. The question is: what is being planned for the central leadership of the programme next April, when it ceases to be housed in the Department of Health? So far, we have had no public word on that critical question.
	There is a real risk of a disaster in the making, not intentionally but by mistake. I have to ask the noble Earl three questions-not to embarrass him, because I know his heart is in the right place. However, I get heartrending letters from people every week and there are millions of people out there whose lives are at stake in all this. If I might, I should like to end with the three questions. First, what plans do the Government have for the central IAPT leadership team? That really is crucial. Secondly, will the IAPT outcomes be incorporated in the outcomes framework? Thirdly, will the Government introduce rights to waiting times in mental health as in physical health? I hope that the noble Earl can help us on all these points, either today or shortly hereafter.

Baroness Tyler of Enfield: My Lords, it is always daunting to follow someone as eminent as the noble Lord, Lord Layard, in a debate on mental health, but that is what I will seek to do.
	Like many other noble Lords this evening, I very much welcomed the Government's mental health strategy, No Health Without Mental Health, which gave clear priority to a long-neglected area of health policy. The implementation framework for that strategy, which was published earlier this year, was equally welcome in ensuring that the strategy did not simply gather dust. Like my noble friend Lord Alderdice, I greatly welcome the £400 million that the Government have invested in improving access to psychological therapies-IAPT-as a key plank of the strategy.
	While I am pleased that the NHS Commissioning Board has endorsed the framework, it is also vital that the board makes the implementation of the strategy one of its key priorities. Like the noble Lord, Lord Layard, I think that means that it should feature prominently in the commissioning board's mandate and the NHS outcomes framework. I ask the Minister to update, and I hope assure, the House on that point.
	However, even that will not be enough to make a reality of improved mental health services for all. More is needed and I want to pick out three things. First, the forthcoming changes in the commissioning arrangements give the potential for a greater focus on early intervention. This means commissioners in CCGs and the national commissioning board having access to the right level of mental health expertise, both to assess mental health needs and to commission the right services to meet those needs.
	Secondly, the Government have stated their intention to introduce payment by results for mental health services. The first step here is the long-awaited development of tariffs for mental health services. I know that those involved in the development of tariffs have expressed concerns about the lack of clear guidance from the Department of Health and in some cases poor data and inadequate IT systems at a local level. This does not augur well. I think that the sector as a whole recognises the challenges that payment by results represents for the whole mental health system, but can the Minister update the House on what additional support the department is making available in this complex area? Thirdly, with the expansion into mental health services of payment by results, we also need to ensure that the outcomes for which providers are paid fit with the objectives of the mental health strategy and are aligned with NICE's work on quality standards. In other words, it must all join up.
	We all know that mental ill health cannot be tackled by NHS mental health services alone. It is crucial that others-we have already heard about them this evening: local authorities, employment, housing, and criminal justice-play their part. The new health and well-being boards will be vital in helping local government, the NHS and others, including the voluntary sector, to tackle the causes of ill health at source. I look forward to seeing well-being services set up, which would include occupational health, housing, smoking cessation, fitness centres and mental health services working together for new attitudes towards public mental health.
	Like others, I mentioned the importance of IAPT at the beginning of my speech, and I recognise that we have already heard some differing views on this tonight. While I am a great supporter of the concept of talking therapies, my view is that the current policy does not adequately or accurately reflect the importance of providing a range and choice of counselling and psychotherapy to meet a range of needs. I recognise and welcome the limited expansion of IAPT from purely CBT models to include other models such as couple therapy for treating anxiety and depression in cases where relationship problems are also a factor-either a cause or a consequence of the depression.
	However, specialist providers, particularly those in the voluntary sector, have found it very difficult to navigate their way through an IAPT commissioning process that was clearly designed with the statutory sector in mind-a point that I thought was made very compellingly by the noble Lord, Lord Wills. I believe that counselling and psychotherapy play a vital role in promoting good mental health and well-being, and in the treatment of mental ill health. In my view, current government policy still does not sufficiently reflect the role that counselling and therapy can and do play. I would like to see more collaboration and joint working in this area.
	Finally, I draw attention to the importance of improved mental health services for children and young people, for if mental health services have long been seen as the Cinderella of health services generally, surely children's mental health services are the Cinderella of that Cinderella service. Yes, the role of the NHS is crucial here, but so too is the role of schools and the voluntary sector.
	We all know of the parlous state of the NHS Child and Adolescent Mental Health Services, known as CAMHS. In a recent survey of providers and commissioners conducted by YoungMinds, over half of respondents said that they intended to reduce their spend this year. The biggest cuts were in local authorities, with some slashing up to 25% from their budgets. On a more positive note, some 20% said that they were planning to increase their funding for CAMHS. All this can only exacerbate the existing, very large variations in availability, quality and timely access to these vital services. On top of these, many voluntary sector services, as we have already heard, are having to cut back or close down.
	I welcome the new bond initiative funded by the Department for Education to increase the availability, quality and young-person focus of early intervention services that address mental health issues earlier. However, this is currently a limited pilot in five local authority areas. Equally, I welcome the new children's IAPT pilot, again in a small number of areas. I ask the Minister what plans the Government have for rolling this out more widely.
	Touching on a point made by the noble Baroness, Lady Meacher, while thousands of young people in Wales and Northern Ireland benefit from national programmes of school-based counselling, England lags behind as the only country without a commitment to these services. This leaves many young people in England without effective and accessible therapeutic support in schools, despite the fact that counselling is associated with significant reductions in psychological stress. The Welsh Government's national school-based strategy, which has been externally validated, has been shown to be an overwhelming success, so much so that the Welsh Government are planning to make counselling in Welsh secondary schools a statutory service. With the clear benefits that it has demonstrated in improving attendance, behaviour and attainment in schools, surely providing access to school counselling could be one good use of the pupil premium in England.
	Why have I made such a great play of children and young people's services? Research has shown that huge costs to the economy are associated with mental health problems, which all too often begin in childhood and continue into adulthood. Perhaps I may give noble Lords a few facts. Half of all lifetime mental illness presents by the age of 14, contributing to the vast economic and social costs of mental health problems. One in 10 children under the age of 15 has a diagnosable mental health disorder. Rates of mental health problems among children increase as they reach adolescence. Between one in 12 and one in 15 children and young people deliberately self-harms. More than half of all adults with mental health problems were diagnosed in childhood, but-this is the crux of the matter-fewer than half were treated appropriately at the time. According to the then Department for Children, Schools and Families in 2009, 60% of children in care have some form of mental health disorder. This is an astonishing figure that calls for an urgent response.
	In summary, mental health problems obstruct many key goals for children. I would welcome the Minister saying what more the Government are doing to join up policy effectively, particularly between the Department of Health and the Department for Education, in order to address the mental health problems of children and young people. It is a no brainer that we must do this. It makes sense socially, economically and morally.

Baroness Young of Hornsey: My Lords, like other noble Lords, I thank the noble Lord, Lord Alderdice, for introducing the debate this evening. I am sure that we will all acknowledge that although some progress has been made in this area, there is still an awful lot of work to be done. No doubt we will return to this subject in the years to come.
	I am very glad that the noble Baroness, Lady Tyler of Enfield, spoke so much about children and young people. This is a point that I, too, will make. She also raised the issue of the implementation framework for the mental health strategy for England. That is another area I will touch on this evening. As the noble Baroness stated, we need to do much more to build good mental health and resilience among children and young people from birth through to adulthood. At the other end of the scale we also need to address the challenges faced by an ageing population, with an increasing number of older people experiencing significant mental health problems, including but not exclusively dementia. As always, I am afraid that there is still a substantial job of work to be done to ensure that ethnic minority service users are treated fairly.
	The content of the implementation framework has been well received. However, there is no statutory backing, and it is phrased only in terms of what local health and other bodies, including the voluntary sector, "might" rather than "must" do. At this time of severe spending constraints in the NHS, will the Minister explain how his department intends to ensure, first, that the NHS across England acts on the implementation framework; and, secondly, that non-NHS organisations, too, which are crucial to the success of the strategy, act on the framework? As the noble Lord, Lord Wills, mentioned, that will include ensuring proper support and proper mechanisms to enable the service to be of the highest quality.
	An increasing body of evidence shows that children and young people can develop mental health problems from a very early age, and that these problems, if not addressed quickly, and effectively, have a higher risk of developing into adult mental illness. Most adolescent and adult mental illnesses can be traced back to childhood. Therefore, there is an urgent need to focus on children's early years, for example through building parenting skills and providing support to vulnerable families with young children. In addition, schools have a crucial role to play in building children's emotional well-being, especially given the link between mental health and academic achievement.
	Although for clear reasons we focus on mental ill health, we should also look at how we understand mental well-being and how we can encourage and develop and make sure that that works, in order to pre-empt instances of mental ill health. I would like the Minister to acknowledge the importance of children's and young people's mental health, and outline the department's proposals for increasing support for parents and families, particularly with young children, in vulnerable situations. I reiterate what the noble Baroness, Lady Tyler, said about children in care being at very high risk of developing mental ill health both while they are in care and subsequently.
	The Mental Health Foundation project, Age Well, is a two-year inquiry funded by the Esmée Fairbairn Foundation. We have been looking at the factors affecting the mental health and well-being of the generation of people currently aged between 55 and 65-the so-called baby boomers-as they get older. I have been privileged to chair the panel of inquiry that will be publishing its report on this subject shortly. The rationale for conducting the inquiry was that people born between 1946 and 1955 are now growing older and moving into a life-transition period. Growing older, of course, brings challenges that are different from those faced in earlier phases of life.
	Evidence shows that the experience of mental illness in later life is often underrecognised, underrated and inadequately treated. Risk factors for mental ill health for the cohort include bereavement, the disabling effects of chronic conditions, pain, the effects of being a carer, loneliness, social isolation and so on. Protective factors include-and this relates to mental well-being-social ties, connectedness, intimate relationships, friendship and engagement in social activities. Good self-esteem and self-reliance can also buffer people against difficulties.
	A major factor in population ageing is survival against premature death; fewer people in the 1946-1955 group have died in childhood, young adulthood or middle age, but the evidence is that they may not be much healthier than previous age cohorts as they grow older. Inequalities have been growing in the UK population since the 1980s. This is shown in a range of outcomes, including experience of illness and poor mental health. There is a need to focus on protecting those who are most likely to be at risk for poor mental health and experiencing mental illness.
	These are some of the key findings that we have uncovered and had witnesses speak to us about so far. We would like to be assured that the Minister and his department are fully aware of and are equipped to deal with the implications for our ageing population of mental ill health and promoting mental well-being.
	The Mental Health Foundation and Age UK hosted an expert seminar earlier this year on mental health among older people. There were a number of key messages from that group. I am not going to go into them all now because there is a report available. However, there is no doubt that the NHS reforms have created a period of great uncertainty and that everyone interested in older people's mental health needs to keep pressure on the reorganised NHS, public health and local authority bodies to work together to plan and commission a suitable range of support for older people.
	Another crucial issue for the mental health services must be ethnic minorities' experience of the mental health system; people of African Caribbean descent in particular are still being prescribed stronger medication, are more likely to sectioned, and, at least in London, are more likely to be referred to the mental health services by the police. Can the Minister tell the House about specific mechanisms for engaging with this issue and when we might expect to see some improvement in an area that has long dogged the mental health services?

Baroness Emerton: My Lords, I, too, thank the noble Lord, Lord Alderdice, for raising this important debate. Yesterday morning I was listening to Radio 4 and was somewhat taken aback when they said it was mental health week. A church service was being relayed from Epsom, I think, where there had been a great cluster of psychiatric hospitals. I really did not know that there was such a thing as mental health week, so I confess my ignorance. The Government had a No Health Without Mental Health strategy. I would add, no health without mental health, patient well-being, public health and physical health; in other words, a holistic care pathway.
	I am a retired nurse and also a mental health carer. I concur wholeheartedly with the other speakers, particularly the noble Lords, Lord Alderdice and Lord Layard, about the benefits of psychological treatment and also how scarce it is. I say that with very definite first-hand knowledge-the scarcity is having an effect on the person I care for.
	Much has been achieved in the provision of mental health services, but against the current situation of economic austerity and consequential cutbacks we are seeing areas where services are definitely suffering. I can give an example. Recruitment to mental health care nursing programmes is excellent, but the cutbacks in student numbers will have a long-term effect on people's readiness to come into nursing as registered nurses. Already the CQC has recorded that the situation has led to an increase in support workers to fill the gaps left by registered nurses. This is a false economy as the evidence is clear that if the ratio of registered nurses to support workers decreases, the quality of care delivered is affected. Can the Minister say whether the Government will address the long-term effect of reducing the student intake and the adverse effect on patient care, and that the reduction of the ratio of registered nurses to support workers will be re-examined? Further, will the support worker training programme become a mandatory training programme, not leading to a voluntary register? I know that the noble Earl will not be surprised to hear me say this yet again.
	Implementing the holistic care approach will be assisted by the Nursing and Midwifery Council. The care standards it is introducing are to be implemented in November this year in all universities preparing nursing students in all specialties to gain 50% theory and practice in each. This is further assisted by the Chief Nursing Officer's recently published vision of developing a culture of compassionate care. The values and behaviours of the vision are that at its heart are what are described as the "Six Cs"-compassion, care, competence, communication, courage and commitment.
	However, as has already been mentioned by several speakers, there are still many barriers between the different professional groups: the NHS, local authorities, the third sector and the independent sector; they all need to be broken down. This requires a special kind of leadership that can effect change through not only a detailed knowledge of each organisation and how it works, but also the personal leadership qualities of persuasion and influence. This needs to be recognised within a defined government strategy with a given time-span. When the large psychiatric and mentally handicapped, as they were then, learning disability institutions were closed, there was a clear strategy with a timetable to address the situation. Many speakers have referred to the outcome framework, and surely something could be built into it. That would provide a definite target date for working towards a cohesive service and, in turn, it would allow for the development of the holistic care pathway.
	Mental health services present a complex field of practice with an enormous plurality of providers and stakeholders. Added to this are the demographic profile of an ageing population and workforce, and a loss of experienced practitioners due to the financial cutbacks. Against this background, commissioners of services call for strong leadership that understands the complexity of conditions and has the sensitivity to know that providers are equipped to deliver high quality services. Would the noble Earl consider that there might be an opportunity for the Government to highlight the need for such leadership qualities and build this into the policy requirements? In the absence of high quality leadership, the culture of mental health services will deteriorate, leading to a fall in the quality of practitioners and the services provided, along with a lowering of standards. Can Her Majesty's Government allow that to happen to this very vulnerable group of the population? I think not.

Lord Patel of Bradford: My Lords, I too add my thanks to the noble Lord, Lord Alderdice, for tabling this important and timely debate. The noble Lord has made and continues to make an immense and important contribution to this area of healthcare in terms of its development and delivery. Like him, I believe passionately that we must do a great deal more to address the needs of people who suffer from mental health problems.
	The question before us today is how do the Government intend to strengthen the provision of mental health services in the NHS? It is a vital question at a time when the NHS is facing the most significant upheaval in its entire history and the finite resources we have for healthcare are being further reduced.
	When the coalition Government first came to power I was very pleased to see mental health given priority attention. Those earlier efforts to raise the profile of mental health problems were very much welcomed, in particular their strategy No Health Without Mental Health, although I think I prefer the title of the noble Baroness, Lady Emerton. The Government have continued to invest in talking therapies and we have seen the excellent anti-stigma campaign Time to Change. However, I have to ask myself what is really changing? What lies beneath all the rhetoric and good intentions? The problems are certainly not getting any less.
	My noble friend Lord Layard talked about his recent report published by the London School of Economics that sets out some of the starkest evidence that I have seen that the problems are getting worse. More significantly, as we see increasing levels of problems, we do not see a similar rise in treatment services. The report clearly outlined that mental illness is now nearly half of all ill health suffered by people under 65 and it is more disabling that most chronic physical disease. Yet, only a quarter of those involved are in any form of treatment. Mental illness also accounts for 23% of the total burden of disease. Yet, despite the existence of cost-effective treatments, it receives only 13% of NHS health expenditure.
	There are currently six million people with depression or crippling anxiety conditions, and more than 700,000 children with problem behaviours, anxiety or depression. The noble Baronesses, Lady Tyler and Lady Young, raised the important issues with respect to these children. However, most of these people receive no treatment because, as the report says:
	"NHS commissioners have failed to commission properly the mental health services that NICE recommend".
	The report concluded:
	"The under-treatment of people with crippling mental illnesses is the most glaring case of health inequality in our country".
	It is a shocking form of discrimination because effective psychological treatments exist but are still not widely enough available. What steps are the Government taking to address this health inequality and to ensure that local authority and NHS commissioners do commission mental health services in line with NICE recommendations?
	It is very clear that we cannot allow this situation to continue. At a time when the economy continues to struggle it is vital that these issues are addressed, because the lack of adequate mental health provision is threatening the chances of our economy recovering. For example, recent research shows that one in 10 workers has taken time off work because of depression. The MORI poll that identified this figure was conducted across seven European countries involving more than 7,000 people. Overall, 20% of those polled had received a diagnosis of depression at some point in their lives and, shockingly, the highest rate was in Britain, where 26% had been diagnosed. Among workers experiencing depression, 58% in Britain were most likely to take time off. Surely, in view of these facts, the Government need to rethink cuts to mental health care and should be looking to expand care instead.
	Notwithstanding the comments made by the noble Lord, Lord Alderdice, about therapies, evidence has shown that the cost of psychological therapy is low and recovery rates are high. Expenditure on psychological therapies for the most common mental health problems is also cost effective as long as we take heed of the comments made by the noble Baronesses, Lady Meacher and Lady Tyler, about the need for consistency, quality and choice of services. For example, when people with physical symptoms receive psychological therapies, the average improvement in physical symptoms is so great that the resulting savings on NHS physical care would outweigh the cost of psychological therapy-a point made clearly by my noble friend Lord Layard.
	It was for these reasons that the Labour Government started in 2008 the six-year IAPT programme. We know that in areas where this has been effectively commissioned, it has had a positive impact. However, we also know that the £400 million earmarked by the coalition Government for psychological therapy has not always been used for its intended purpose because there was no commitment on NHS commissioning managers to do so. It is essential that that programme is completed as planned, since even this will provide for only 15% of need.
	What about those with more complex and enduring mental health problems? Let us not forget that when we are talking about strengthening NHS services, this includes services provided in prisons, where we know there are very high numbers of people with mental health and substance misuse problems. In fact, the annual report to Ministers by the independent monitoring board at HMP Pentonville reported that health and social care workers providing health support to inmates are being stretched by a "serious and sharply increasing" rise in demand for care. The report stated that mental health teams at the prison received 24 referrals a week in 2011-12, up from 18 a week the year before. Incidents of self-harm had also increased "very significantly" over the past year. The prison's 22 in-patient beds, the majority of which are used for mental health patients, were full to capacity. The report said that the reasons behind the spike in mental health demand at the prison were "not fully understood", and warned that,
	"further resources are urgently needed to tackle these issues".
	What will the Government do in response to this report to address the urgent health service resource needs in prison to tackle complex mental health issues?
	When we are talking about vulnerable groups, we know that people from black and minority ethnic communities face specific difficulties, including higher rates of mental illness in some groups and problems with access to the right care and treatment-issues raised by the noble Baroness, Lady Young. Service user groups have expressed fears that funding provided to local user-led mental health groups, where some of the best progress has been made in black and minority ethnic mental health service user involvement, may especially be vulnerable when services are looking to make significant economic savings.
	I share these concerns especially in light of the establishment of more generic service user involvement mechanisms such as Healthwatch England and local Healthwatch organisations. These cannot and must not be seen as a replacement for involvement mechanisms especially for mental health service users, and especially not for those that engage black and minority ethnic communities and have a rights-based focus capable of addressing issues in relation to the use of compulsion under mental health law. What specific steps are the Government taking to ensure that vital local user-led mental health groups are being maintained alongside Healthwatch and not being replaced by them?
	In conclusion, it has been said that the challenge of mental health should be placed at the heart of Government but I suggest that where it really needs to be is at the heart of the new commissioning structures within clinical commissioning groups and local authorities. But as the NHS has clearly failed to commission mental health services in line with official guidance, and with further pressures to come on the whole NHS budget, will commissioners be able to take the action that is needed on securing and developing mental health services? I greatly fear that mental health services will continue to be the Cinderella services and that the urgency of need and the benefits that can be realised are not fully understood within these new and as yet untested commissioning structures. My final question to the Minister is: what will the Government do to ensure that clinical commissioning groups and local authorities address the full range of needs for mental healthcare in their commissioning plans?

Earl Howe: My Lords, I begin by congratulating my noble friend Lord Alderdice on securing this debate, and on raising the important issue of strengthening mental health in the NHS.
	This is a timely debate. Wednesday is World Mental Health Day, a day which sends an important message across the global community: mental health is everyone's business. As the noble Baroness, Lady Young, rightly emphasised, it is appropriate to turn the spotlight on mental health services at a time of huge structural and service reform across health and social care, when a lot of the attention has been focused on primary care and clinical commissioning groups. It is vital that mental health is woven in to the fabric of these reforms.
	Before I respond in detail to the remarks made by my noble friend and other noble Lords, I want to take this opportunity to thank him and the noble Lord, Lord Layard, in particular for their lobbying, research, advice and support, which have done so much to set the standard for mental health services and drive system reform.
	The recent report from the London School of Economics' Centre for Mental Health, How Mental Illness Loses Out in the NHS, makes a compelling case for prioritising investment in mental health services and for treating mental ill health as seriously as physical ill health. Although we take issue with some of the content, we are in full agreement on these two central tenets of the report. Mental health simply cannot be an add-on or an afterthought. It costs £105 billion per year, to say nothing of the emotional toll that it takes on individuals, families and carers, so it must always be in the foreground when we think about health and social care. The messages are clear from people with mental health problems and their carers. They want to see a real difference in the range, quality and choice of services available. They want everyone to benefit from our mental health strategy, "No health without mental health". This includes people with severe and enduring mental illness, those from minority ethnic communities and individuals who have offended.
	They also want us to recognise the importance and expertise of family carers, who have so long occupied a shadowy position ill-served by legislation. This Government have committed themselves to fulfilling those wishes. Our new mental health implementation framework, coproduced with five leading mental health charities, sets out how we will do that. The framework translates the strategy's vision into practical action for specific organisations. It outlines what the new health and care system will mean for mental health; and it shows how the mental health strategy fits with the three outcomes frameworks for the NHS, social care, and public health, and how each will help to deliver the other.
	On top of that, the draft mandate to the NHS Commissioning Board, published for consultation on 4 July and mentioned by my noble friend Lady Tyler among others, also emphasises the importance of a new focus on mental health. This is reflected both in a dedicated objective on mental health, and in objectives for improving performance against the NHS outcomes framework. Overall the mandate suggests a culture-change on mental health throughout the NHS.
	I simply say to the noble Lord, Lord Layard, that the Commissioning Board is discussing future arrangements with Ministers, but in the end, as he will recognise, it will be up to the Commissioning Board to deliver its commitments, and not for the department to second-guess the board. The noble Lord, Lord Layard, has said that the outcomes framework contains almost nothing on mental health. This is simply not the case. The 2012 framework contains three improvement areas which relate specifically to mental health-

Lord Layard: I was referring only to it containing nothing about the outcomes from IAPT, which is a very big service. There is nothing about recovery from depression and anxiety.

Earl Howe: I am grateful, and I will come on to that point. It is just worth rehearsing that there are three improvement areas: premature death in people with serious mental illness, the quality of life of people with mental illness, and the experience of healthcare for people with mental illness. In addition, many of the indicators relate to all patients and therefore apply equally to mental health patients. We are keen to strengthen the outcomes framework in relation to mental health in general, and recovery from mental illness in particular. We have recently begun work to define what good recovery from mental illness looks like, recognising that for some people this will mean the effective management of symptoms rather than a cure, and to develop proposals for how this might be measured. Our aim is develop measures that are suitable for inclusion in the NHS outcomes framework.
	I know that some, like the noble Lord, Lord Layard, have been concerned that not enough is being done to meet the needs of people with long-term physical health conditions who also have mental health needs. We are addressing that. One of the measures by which we will gauge the success of the NHS Commissioning Board will be its ability to improve care for people with long-term conditions. This obviously includes people who have both physical and mental health problems.
	Moving on to IAPT, we are also addressing the criticism that psychological services are too difficult to access in the first place. The operating framework for the NHS in England clearly states that the NHS should carry on expanding access to psychological services as part of the improving access to psychological services or IAPT programme. The noble Lord, Lord Patel of Bradford, said that change on the ground was hard to discern. The coalition Government have overseen a big increase in the number of people benefitting from IAPT services: 528,000 people entered treatment in 2011-12, more than double the number in 2009-10.
	These new services are achieving recovery rates of more than 40% and are on track to meet recovery rates of at least 50%. We are investing £32 million this year in training new therapists to meet the demand. More than £400 million will be channelled towards talking therapies so that adults with depression and anxiety across England can get access to NICE-recommended psychological therapies. That investment will also help to fund the expansion of psychological therapies for children and young people-I shall say a bit more about that in a moment. We are also looking at how older people, carers, people with long-term physical health problems and those with severe mental illness can get better access to evidence-based psychological therapy.
	Contrary to the statements quoted by the noble Lord, Lord Patel, we have no evidence of underinvestment by the NHS in IAPT services. On the contrary, funding is going up. At present, 149 out of 151 PCTs commission an IAPT service, which is nearly 100 services across England covering more than 95% of the population. However, in order to secure consistently good services, there needs to be a fundamental change in the way our society views mental health. Both individuals and organisations need to change some views that on occasion are deeply entrenched. We have commissioned the Royal College of Psychiatrists to look at how we can encourage everyone to ascribe the same importance to mental health and physical health. The work involves many leading royal colleges, professional associations, charities and others. It includes concrete examples of positive changes that parity would help to bring about. The college has already begun to collect and develop examples of both good and bad practice, and its final report will be available shortly.
	My noble friend Lord Alderdice mentioned skills. It is important to note the influence that the royal colleges can wield in improving mental health services. The Royal College of General Practitioners has identified improved care for people with mental health problems as a training priority. It has proposed enhanced training for GPs, designed to increase clinical, generalist and leadership ability. I welcome its suggestion that mental health should be a central part of that enhanced training.
	The GP curriculum and examination system will be changed to accommodate the new system of training, so we can look forward to newly trained GPs with an extremely broad knowledge of mental health issues. That is an excellent example of the role that groups outside government can play.
	There have been a lot of stories about spending on mental health services being cut, but spending on mental health has stayed broadly level in cash terms. Although this has meant a very slight reduction when compared with inflation, this is quite an achievement given the huge cost pressures on the NHS and quite a different picture from the one that is often claimed.
	My noble friend Lord Alderdice and the noble Lord, Lord Patel, questioned how we know that the £400 million is being spent on IAPT. The NHS is accountable to the department for results, not for spending money in line with predefined pots; it is outcomes that count. We have made sufficient money available to the NHS to maintain the expansion of IAPT. We have made very clear what results we expect from that investment, but local commissioners must be in a position where they decide how to use their budgets to meet the health needs of their local populations. That is not something that we can decide in Westminster.
	The noble Lord, Lord Layard, and the noble Baroness, Lady Emerton, spoke about the slowing down of this effort. Preliminary figures for the first quarter suggest that the expansion of talking therapy services is slowing in some parts of the country. We are looking at the data to make sure that we understand whether that is temporary or something more serious, but it is clear that the picture is very variable across the country.
	I have just received a note to say that my time is running out. I say now that I will write to all noble Lords whose questions I have not covered, but I shall in the time available cover as many more as I can, in particular on children's services, which was a theme of my noble friend Lady Tyler and the noble Baroness, Lady Young.
	Children's mental health is a priority for this Government. The Government's mental health strategy takes a life-course approach, recognising that the foundation for lifelong well-being is already laid down before birth and that there is much we can do to protect and promote well-being and resilience through our early years and adulthood. We have invested up to £54 million over the four years from 2011-12 to 2014-15 in evidence- based practice, such as children and young people's IAPT, undertaken work to introduce payment by results for CAMHS, which my noble friend Lady Tyler referred to, and announced plans for a children's health outcomes strategy.
	Children and young people's IAPT is a service transformation project for CAMHS, extending training to staff and service managers and embedding evidence-based practice across services to make sure that the whole service, not just the trainee therapists, use session-by-session outcome monitoring.
	My noble friend Lord Alderdice and the noble Baroness, Lady Meacher, questioned whether there was a bias towards IAPT to the detriment of other services. Although I agree that there are different approaches to providing psychological therapies, it is local commissioners and not central government who are responsible for determining which services should be funded. I am happy to write on that theme, about which I have further information-as I do about charities, a point raised by the noble Lord, Lord Wills, who also asked me about the mental health legislation resource. I have a note that I would gladly have read out, but time has eluded me. I will also gladly write to the noble Lord, Lord Patel, about prisoners' mental health and to my noble friend Lord Alderdice about patients being locked in at night at Broadmoor, as well as any other points that I have not covered. I am very grateful indeed to all noble Lords who have spoken in what has been a most illuminating and helpful debate.

European Union (Approval of Treaty Amendment Decision) Bill [HL]
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	Returned from the Commons

The Bill was returned from the Commons agreed to.
	House adjourned at 9.16 pm.